the fica tax you see on your paycheck. i will do some quick math here, mr. speaker. bear with me. 40.3% in federal taxes. the tax rate for every middle class american in the land. i ask you, mr. speaker, are tax rates too low? do you think you ought to work for the first five months out of the year just to pay your federal tax burden before you begin to pay your state tax burden, before you begin to pay your local tax burden, before you begin to actually earn money to pay for your food and shelter and clothing for your family? 40% is a marginal tax rate.

35%, mr. speaker, is the rate that that 1% are paying today. 35 cents out of every dollar earned by that top 1% today, at the marginal tax rate for those folks. now, a lot of folks don't realize taxes are already going up next year. the president's health care bill, that bill that i was not here to oppose it though i tried to repeal it, i haven't been able to get that through the senate, but the president's health care bill raises taxes come january 1. so on the top income bracket that the president wants to raise taxes even further on, they have a tax rate increase coming and it's coming on january 1. 3.8%, mr. speaker. every dollar of earned income

these top 1% earn is going to have a new 3.% medicare tax added to it. 3.8%. 0.9%, mr. speaker, that's an increase in the medicare tax on the earned income of these folks. 3.8% increase on the unearned income, 0.9% increase on the earned income. 2.7%, mr. speaker. that's the medicare tax that that top 1% is already paying on all of their earned income today. it's going to go up another .9. they are already paying 2.7. the president says that's not

enough. let me do some quick math here. they are only gg to have to pay one, mr. speaker, either the unearned income tax or earned income tax that would be 3.8% either way. they are paying 39.8, plus this 15.3, of course, on all those dollars that are subject to medicare and social security under the cap today, plus another 6% the average rate for state income tax today. let me add those. my home state of georgia, let me come back over here to these

middle class taxpayers that appear to be paying 46.3% as a marginal rate of every dollar they earn. back over here to the high income folks, before they pay their payroll taxes, we have 44.8, and of course on that money that they earn up to $100,000 they are paying an additional 11.5% on that. 11.5 added to 44.8. that's over 56% tax rate. mr. speaker, how much is enough in -- enough? when does freedom in this country cease to have meaning? at what level of confiscation of the work product of the american people does freedom cease to have meaning?

we got to be getting close to it, mr. speaker, but more importantly, when we talk about paying their fair share, when is america as a whole paying its fair share, mr. speaker? when is america paying its fair share but the federal government is spending too much anyway. middle class america, 46.3%. that's middle class america. that's $35,000 a year you are earning. and your federal government and state government hit you for a combination of 46% of every dime. what incentive is that to go out and work longer and harder? 46%. 57 over here. 57. we all know small businesses create all the jobs in this country. that's why we are so worried about this tax proposal because while this is already 57% over here, mr. speaker, the president wants to raise it another 3 to

almost 60%. 60% of every dime earned by family-owned businesses, the president wants to take back to washington, d.c. i'm in favor of a balanced approach. i'm committed to fairness in american society. but, mr. speaker, i ask you, is the problem that taxes are too low or is the problem that spending is too high? what better than class warfare, mr. speaker. we are better than saying we are going to ask the them to bear the burden while the we been fit. -- ben fifment -- benefit. 320 million of us have to come together, mr. speaker.

on tough, tough challenges. challenges that this house has crafted solutions to. these solutions are not easy. these solutions are not pain free. these solutions involve shared commitment from every single american. because as freedom is eroding in this country, every single american suffers. and economic opportunity and economic liberty is expanded in this country, absolutely every american benefits. we can do better, mr. speaker. as a nation we have done better,

as the united states house of representatives. and i come here today just to remind my president, the white house, that the election is over. the time for clever sound bites that register on the public opinion polls is far behind us. in front of us are hard, hard decisions that this house has led on and that we are waiting patiently for partnership to work on and to pass. i want to leave you three numbers, mr. speaker. h.r. 5652, h.r. 5652, it's the -- it was passed in may called the sequester replacement reconciliation act. it was the house passed idea to avoid the debilitating sequester cuts that we see coming. to deal with the mandatory

spending side of the equation, passed in a bipartisan way here in the house. only proposal to have been passed by a body. passed in may. leave you with h.r. 8, mr. speaker. the job protection and recession prevention act. that's our plan, house passed plan, for how to deal with these tax increases that threaten america's family owned business, threaten our economy. how to deal with them in a responsible way, get us passed this fiscal cliff, passed in august, only plan in washington, d.c., to prevent these debilitating tax increases from hitting across all of our family owned small businesses. finally, mr. speaker, h.r. 6365, it's the national security and job protection act. we passed that in september. that's the bill that looks specifically at these coming defense cuts. these cuts that secretary of defense leon panetta has called

devastating in their impact. i know you do, mr. speaker, leon panetta, former chief of staff to president bill clinton, former chairman of the democratic-led budget committee here in the u.s. house of representatives, current secretary of defense calls these defense cuts devastating. this u.s. house has passed a proposal to prevent that second round of cuts from taking place. it's the only proposal anywhere in this town to have passed. we did in august. we took care of our business and we have yet to have partnership from either the white house or the senate. on that proposal. we took the sequester replacement reconciliation act in may. we took care of the job prevention recession act in august, mr. speaker. we took care of the national security and job protection act in september, mr. speaker. the work of this house has been done. month after month after month.

we passed two budgets in a row, mr. speaker, that take on the tough challenges of entitlement reform, that take on the tough challenges of increasing revenue, that take on the challenges that no congress in my lifetime has ever taken on, mr. speaker. we did it not once but we did it twice. and the silence from the senate and the white house has been deafening. we can do it, mr. speaker. we must do it. this house has done it. and as we did in may, as we did in august, and as we did in september i reach out my hand again, mr. speaker, to the senate and to the white house to join us in tackling these tough solutions, tackling these challenges, providing these solutions, not the republicans, not the democrats, not for

politics whatsoever. but for america. because it's the right thing to do and without it we all know where this country is headed. mr. speaker, with that i yield back the balance of my time. search the gentleman yields back the balance of his time. under the speaker's announced policy of january 5, 2011, -- the speaker pro tempore: the gentleman yields back the balance of his time. under the speaker's announced policy of january 5, 2011,, the chair recognizes the gentleman from kentucky, mr. whitfield, for 30 minutes. mr. whitfield: thank you very much, mr. speaker. we all recognize that in this country we recently had a national election. we have a lot of new members of the house of representatives. we have new united states senators. president obama and vice president biden are back in their offices. we have had new office holders elected in many states and local communities as well. and while we have a lot of change in the elected offices,

we all know that a big part of government relates to what we refer to as the executive branch and that means various departments of government and agencies within those departments of government. and those people work very hard. they are committed to the american people. they are not elected. and many times we do not even know who they are. now, today i want to raise an issue that is vitally important to all of the american people. because on or about december 10, the levels of water on the mississippi river are going to be so shallow between st. louis, missouri, and cairo, illinois, and then on top of that because of rock tentacles between red

tower and theebs, illinois, that river traffic may come to a halt on the mississippi river. and that means there's going to be millions of tons of commodities that are not going to be able to be transported north and south on that river. and of course that affects not only the recipients of those commodities, and the shippers of those commodities, but in directly -- indirectly people who mine, make, manufacture, supply those commodities. and so this potentially can have a dramatic impact and negative way on the economy of our country at a time when we are trying to stimulate the economy, create more jobs, and make sure that we do not throw ourselves back into a recession.

now, in november, early november, and even toward the end of october, over 15 united states senators, around 65 members of the house of representatives, five or six governors of various states have written letters to president barack obama, major philip may, regional administrator for region four of the federal energy management agency, mr. george "tony" robinson region six federal emergency management agency, ellen darcy, assistant secretary of the army for the corps of engineers. mr. william craig fugate, administrator for the federal emergency management agency, mr. andrew velazquez, regional administrator, reasonon five for the federal emergency management

agency, ms. beth freeman, regional administrator region seven for the federal emergency management agency, in which we point out this impending problem. . now i'm not the only one talking about this. every member of congress along that corridor are receiving phone calls, letters, emails, we have all sorts of groups out there very much worried about this problem needing to be solved. and it can be solved. but it appears that the corps of engineers has an annual operating plan. and this annual operating plan determines how much water they are table release from the missouri river into the

mississippi river in the wintertime. and i understand that, that they have to have a plan. but most people in america know that when you have exceptional circumstances, you have some emergency, you have some unintended consequence, that you have to make alternative plans. and so those senators that i talked about, those members of the house that i talked about, the governors that i talked about, 15 or 20 associations that i talked about, all have gone to the corps of engineers and asked them to change their annual plan and release some water from the upper missouri to the mississippi river so that we do not have to stop barge traffic on the mississippi river. and so far, we've heard no

response. and i know that there are groups that are opposed to this. there are some environmental groups that are opposed to this. and for valid reasons. and we're not asking this to be done permanently. but this is an emergency. that will have dire consequences on the economy of this country. and we cannot stand for even a brief period of time to stop commerce on the mississippi river. and of course there's another issue that i mentioned earlier, and that is that we have these rock pinnacles contributing to the problem of the shallow water bed between grand tower and theebs, illinois, and the corps have indicated they're going to take action to remove those pinnacles. and that's vitally necessary as

well. so i'm here today partly because -- out of pure frustration. although some people think that individual members of congress have a lot of power and authority, and sometimes we think that, but the truth of the matter is, these decisions are being made by people at the corps of engineers, maybe the secretary of the department of transportation. they have the legal authority to take action here. but so far, they're unwilling to do so. so i'm here today simply to raise this issue because i don't know what else to do. we've written letters, we've called, these associations and agencies of other governments, state, local, have written letters, have called. we've done everything that we

can do. we've talked, we've asked the president to take action. we've asked the corps of engineers to take action. and we understand that it's not anyone's personal fault. this is caused by a drought of unusual proportion. but when you think about traffic, all traffic on the mississippi river, in that region between st. louis and chi roe coming to a halt -- and cairo coming to a halt, it's going to have a dramatic negative impact on everyone in our country. so i simply am here today to focus attention on the issue, to once again ask the president, ask the assistant secretary of defense, the corps of engineers, to take some action, work with us to resolve this problem. and with that, i yield back the

balance of my time. the speaker pro tempore: the gentleman yields back. the chair lays before the house the following enrolled bill. the clerk: h.r. 915, an act to establish a border enforcement security task force program to enhance border security by fostering coordinated efforts oy aamong federal, state and local border enforcement officials to protect united states border cities and communities from transnational crime including violence associated with drug trafficking, arms struggling -- smuggling, illegal alien trafficking and smuggling, violence and kidnapping along and across the international borders of the united states, and for other purposes. the speaker pro tempore: for what purpose does the gentleman from kentucky seek recognition? mr. whitfield: i move that the house do now adjourn. the speaker pro tempore: the question is on the motion to adjourn.

those in favor say aye. those opposed, no. the ayings have it. the motion is adopted. accordingly, the house stands adjourned until noon on monday next f >> brought to you as a public service by your television provider. >> the program began under one

of the advisers to president franklin roosevelt. to document the conditions under which people were living back when we did not have televisions. we had radio but a lot of places did not have electricity to they could not listen to the radio broadcast to find out what was going on. an economist from columbia university was the head of this project in 1939 when kodak introduced color film, they send found to have his photographers try out to see what they could do. trying this new market and it wanted people who could use it effectively to try it out and publicize it. >> the library of congress

curator shares some of the color photographs taken during the depression and world war ii. sunday at 7:00 p.m. and it 10:00 p.m. eastern this weekend on c- span3. >> earlier today, president obama visited in manufacturing the facility in pennsylvania. ♪ this is about 25 minutes. >> good morning, everybody. please have a seat. have a seat. relax for a second. it is good to see all of you. hello. it is good to be back in pennsylvania.

and eight is good to be right here -- and it is good to be right here. i want to thank michael, robert, and the investor, joe glickman for hosting me today and giving me a great tour. stand up so everybody can see you guys. [cheers and applause] there you go. we have a couple of the outstanding members of congress here. [cheers and applause] now, i'd just finished getting a tour of the workshop. i have to say it makes me wish that joel invented this stuff sooner when i was a kid. back then, you cannot build a roller coaster out of your

erector set. i got a chance to meet some of the folks who have been working around the clock to keep up with the christmas rush. that is a good thing. these guys are santa's extra elves. they manufacture almost 3000 pieces every minute. every box that ends up on store shelves in 30 countries is stamped "made in america." that is something to be proud of. [cheers and applause] by the way, i hope the camera folks have a chance to take a look at some of it. including that flag. joe biden was in costco and he wanted to buy some of this stuff. [laughter] i told him he had too much work to do. i was not going to have him building boiler coaster's all

day long. of course, santa delivers everywhere. i have been keeping my own list for washington. you should keep your eye on who gets some this year. there are going to be some members of congress who get them and some who don't. [applause] this is a wonderful time of year. it has been a few weeks since a long election finally came to an end. obviously, i cannot be more honored to be back in the white house. but i am already missing the time that i spent on the campaign visiting towns like this and talking to folks like you. i love you back. [applause]

one of the benefits of traveling and getting out of the white house is it gives you a chance to talk to the american people about what kind of country we want to be and what kind of country we want to leave to our kids. i believe america only thrives when we have a strong middle class. i believe we are at our best when everybody gets a chance to get ahead. we were talking about these guys' dad. just passed away at the age of 101. these guys have good genes in addition to inventive minds. the stories about businesses, hiring folks, making sure you can get ahead -- that is what america is all about. that is at the heart of the plan

that i have been talking about all year. i want to reward manufacturers and small businesses that create jobs in the united states. not overseas. [applause] by the way, this is a company, one of the few companies in the toy industry that aggressively moved jobs back here. that is a great story to tell. [applause] because we have the best workers in the world. and the most productive workers in the world. we need champions for american industry creating jobs here in the united states. i want to give more americans the chance to learn the skills that businesses are looking for right now, and when to give our children the kind of education they need. i went to lead the world in

research, technology, and clean energy. i want to put people back to work rebuilding our roads, bridges, and their schools. i want to do this by bringing down our deficits in a balanced and responsible way. [applause] >> on this last point, you probably heard a lot of talk in washington and in the media about the deadlines that we're facing on jobs and taxes and investments. this is not some run-of-the-mill debate. this isn't about which political party can come out on top in negotiations. we've got important decisions to make that are going to have a real impact on businesses and families all across the country. our ultimate goal, our long-term goal is to get our long-term deficit under control in a way that is balanced and is fair. that would be good for businesses, for our economy, for future generations.

and i believe both parties can and will work together in the coming weeks to get that done. we know how that gets done. we're going to have to raise a little more revenue. we've got to cut out spending we don't need, building on the trillion dollars of spending cuts we've already made. and if we combine those two things, we can create a path where america's paying its bills while still being able to make investments in the things we need to grow like education and infrastructure. so we know how to do that. but in washington, nothing's easy. so you know, there's going to be some prolonged negotiations. and all of us are going to have to get out of our comfort zones to make that happen. i'm willing to do that. i'm hopeful that enough members of congress in both parties are willing to do that as well. we can solve these problems. but where the clock is really ticking right now is on middle class taxes.

at the end of the year, middle class taxes that are currently in place are set to expire. middle class tax cuts that are currently in place are set to expire. there are two things that can happen. if congress does nothing, every family in america will see their income taxes automatically go up on january 1. every -- every family, everybody here, you'll see your taxes go up on january 1. i mean, i'm assuming that doesn't sound too good to you. that's sort of like the lump of coal you get for christmas. that's a scrooge christmas. a typical middle class family of four would see their income taxes go up by about $2,200. that's for a typical family. it would be more for some folks. that's money a lot of families just can't afford to lose. that's less money to buy gas,

less money to buy groceries. in some cases, it means tougher choices between paying the rent and saving for college. it means less money to buy more kinekx. just the other day, economists said if income taxes go up on the middle class, people will spend nearly 200 billion less in scores and on line. and when folks are buying fewer clothes or cars or toys, that's not good for our businesses. it's not good for our economy. it's not good for employment. that's one path. congress does nothing, we don't deal with this looming tax hike on middle class families, and starting in january, everybody gets hit with this big tax hike and businesses suddenly see fewer customers, less demand, the economy, which we've been

fighting for four years to get out of this, you know, incredible economic crisis that we have, it starts stalling again. so that's one path. the good news is there's a second option. right now congress can pass a law that would prevent a tax hike on the first $250,000 of everybody's income. everybody. so that means 98% of americans, 97% of small businesses wouldn't see their income taxes go up by a single dime, right? because 98% of americans make $250,000 a year or less. 97% of small businesses make $250,000 a year or less. so if you say income taxes don't go up, income above $250,000, the vast majority of americans, they don't see a tax hike. but here's the thing, even the top 2%, even folks who make more than $250,000, they still keep their tax cut on the first

$250,000 of income. so it would still be better off for them, too, for us to go ahead and get that done. families would have a sense of security going into the new year. companies like this one would know what to expect in terms of planning for next year and the year after. that means people's jobs would be secure. the sooner congress gets this done, the sooner our economy will get a boost. and it would then give us in washington more time to work together on that long range plan to bring down deficits in a balanced way. tax reform, working on entitlements, and asking the wealthiest americans to pay a little bit more so we can keep investing in things like education and research that make us strong. all right? so those are the choices that we have. and understand this was a

central question in the election, maybe the central question in the election. you remember. we talked about this a lot. it wasn't like this should come to anybody's -- as a surprise to anybody. we had debates about it. there were a lot of tv commercials about it. and at the end of the day, a clear majority of americans , democrats, republicans, independents, they agreed with a balanced approach to deficit reduction and making sure that middle class taxes don't go up. folks agreed to that. now, the good news is we're starting to see a few republicans coming around to it, too. i'm talking about republicans in congress. so the reason i'm here is because i want the american people to urge congress soon, in the next week, the next two weeks, to begin the work we have by doing what we all agree on.

both parties agree that we should extend the middle class tax cuts. we've got some disagreements about the high-end tax cuts, right? republicans don't want to raise taxes on folks like me. i think i can pay a little bit more to make sure that kids can go to college and we can build roads and invest in n.i.h. so that we're finding cures for alzheimer's. and that's a disagreement that we're going to have and we got to sort out. we say we want to make sure middle class taxes don't go up. so let's get that done. let's go ahead and take the fear out for the vast majority of american families so they don't have to worry about $2,000 coming out of their pockets starting next year. the senate has already passed a bill to keep income taxes from going up on middle class families. that's already passed the senate. your members of congress, like alison and other democrats in the house, they're ready to go. they're ready to vote on that same thing.

and if we can just get a few house republicans onboard, we can pass the bill in the house. it will land on my desk, and i am ready. i've got a bunch of pens ready to sign this bill. i'm ready to sign. [applause] >> ready to sign it. there are no shortage of pens in the white house. and i carry one around for an emergency, just in case. just waiting for the chance to use it to sign this bill to make sure people's taxes don't go up. well, don't thank me yet because i haven't signed it. i need -- i need some help from congress. so the key is though, the american people have to be involved. you know, it's not going to be enough for me to just do this on my own. so i'm hopeful that both sides

are going to come together and do the right thing. but we all know you can't take anything for granted when it comes to washington. let's face it. and that's why i'm going to be asking for all of you to make your voices heard over the next few days and the next couple of weeks. i need you to remind members of congress, democrats and republicans, to not get bogged down in a bunch of partisan bickering, but let's go ahead and focus on the people who sent us to washington and make sure that we're doing the right thing by them. so i want you to call. i want you to send an email. post on their facebook wall. if you tweet, then use a hash tag we're calling my 2k. not y2k. my 2 k. because it's about your two k in your pocket. we're trying to burn that into people's minds.

[applause] so, in the meantime i'm doing my part. i'm meeting with every constituency group out there. we're talking to c.e.o.'s. we're talking to labor groups. we're talking to civic groups. i'm talking to, you know, media outlets, just explaining to the american people this is not that complicated. let's make sure that middle class taxes don't go up. let's get that done in the next couple of weeks. let's also work together on a fair and balanced, responsible plan so that we are paying our bills. you know, we're not spending on things we don't need, but we are still spending on the things that make us grow. that's the kind of fair, balanced, responsible plan that i talked about during the campaign, and that's what the majority of americans believe in. so, i'm hopeful, but i'm going to need folks like you and the people here in hatfield and here in pennsylvania and all

across the country to get this done. and a lot is riding on this debate. this is too important to our economy, it's too important for our families to not get it done. and it's not -- it's not acceptable to me, and i don't think it's acceptable to you, for just a handful of republicans in congress to hold middle class tax cuts hostage simply because they don't want tax rates on upper-income folks to go up. all right? that doesn't make sense. [applause] if your voices are heard, then we can help businesses like this one. we're going to sell a whole bunch. let's -- [applause] let's give families all across america the kind of security and certainty that they deserve during the holiday season. let's keep our economy on the right track. let's stand up for the american

belief that each of us have our own dreams and aspirations, but we're also in this together. and we can work together in a responsible way. that we're one people. and we're one nation. that's what this country is about. that's what all of you deserve. that's what i'm fighting for every single day. andly keep fighting for as long as i have the privilege of being your president. thank you very much, everybody. ["hail to the chief" plays]

>> house speaker john boehner held his own meeting on the fiscal cliff negotiations. this is close do 10 minutes. >> good afternoon, everyone. the president traveled to pennsylvania to visit a small business today to talk about the fiscal cliff. unfortunately, it's the president and members of his own party who were proposing that we let many small businesses, as in hundreds of thousands of them, go over the fiscal cliff. simply put, that's why we don't have an agreement as yet. they said yesterday this is not a game. i used to be a small business

owner. small business owners are regular men and women from all backgrounds who, in today's economy, are facing challenges on a daily basis. and the president's tax increase would be another crippling blow for them while doing little to nothing to solve the bigger problem here, which is our national deficit and our national debt. this debt doesn't exist because we don't tax small businesses enough. it exists because washington continues to spend too much. raising taxes on small businesses instead of taking a balanced approach that also cuts spending is wrong. it's only going to make it harder for our economy to grow. and if our economy doesn't grow, americans don't get new jobs. and the debt problem that we have will continue to threaten our children's future. as i said the day after the election, republicans are not seeking to impose our will on the president. we're seeking a bipartisan

solution that can pass both chambers of congress and be signed into law by the president in the coming days. now, during the campaign, the president pledged to the american people that he would seek a balanced approach to addressing the debt, a combination of new revenues and spending cuts. so the day after the election, i said the republican majority would accept new revenue as part of a balanced approach that includes real spending cuts and reforms. now, the white house took three weeks to respond with any kind of a proposal, and much to my disappointment, it wasn't a serious one. still, i'm willing to move forward in good faith. our original framework still stands. instead of raising tax rates, we can produce similar amount of revenue, reforming the tax code to close loopholes and lower tax rates. that's far better for the

economy, and the american people actually favor that approach by two to one. they favor it even more when we can also show them that real spending cuts will, in fact, reduce the deficit. now, there have been many conversations over the last couple of years that could inform a solution. i hope the president will draw from those discussions and work with both parties to find common ground. solving the fiscal cliff in a manner that addresses the true drivers of our debt and saves american jobs is a great way for the president to start his second term. and for the good of our country, and my colleagues, we're ready to work with the president to achieve those goals. >> mr. speaker, couple things. first, on the issue of tax rates, are you willing to accept no deal that includes some increase in those top tax

rates? and i'm also wondering what our final deadline is on this? when do we really have to have a deal? >> increasing tax rates draws money away from our economy that needs to be invested in our economy to put the american people back to work. it's the wrong approach. we're willing to put revenues on the table, but revenues that come from closing loopholes, getting rid of special interest deductions, and not raising rates. we think it's better for the economy. pure and simple. secondly, the american people expect us to find common ground, to work together, and to resolve this. and frankly, sooner is better than later. >> you've been doing this for a long time. the past 24 hours, is this the necessary public posturing that needs to go on or is there a

serious stalemate right now? >> there's a stalemate. let's not kid ourselves. i'm not trying to make this more difficult. if you've watched me in the last three weeks, i've been very guarded because i don't want to make it harder for me or the president or members of both parties to be able to find common ground. but when -- when i come out the day after the election and make it clear that republicans will put revenue on the table, i took a great risk. and then the white house spends three weeks trying to develop a proposal, and they send one up here that calls for $1.6 trillion in new taxes, calls for a little -- not even $400 billion in cuts, and they want to have this extra spending that's actually greater than the amount they're willing to cut. i mean, it's -- it's -- it was not a serious proposal. and so right now we're almost nowhere.

>> do you expect to speak to the president again? are there meetings scheduled between you and the president? >> a lot of ideas have been put on the table. we've had conversations, and i'm sure we'll continue to have conversations. >> do you think the white house is trying to squeeze you? and if so, will that work? >> listen, most of you know me pretty well. what you see is what you get. i may be affable, someone that can work with members of both parties, which i've demonstrated over the 22 years that i've been here. i've also rather determined to solve our spending problem. and to solve this looming debt crisis that is about to consume us. >> what is it that republicans want on reform? you keep saying the president needs to show the democrats' hand on this. what do you want to do in terms of medicare and how quickly do you want those implemented? >> well, can you look at our budget from the last two years, and there are plenty of

specific proposals, most of which were part of the conversation that the president and i had two years ago. or a year and a half ago. there have been discussions about many of those same issues this time. so there's a -- there's a lot from the conversations that we've had to inform almost anybody the kind of proposals we're looking for. >> even the paul ryan plan on medicare doesn't really take effect for years down the road. do you want something more immediate? >> i think the debt crisis that we face requires us to make serious decisions and it requires us to make those decisions now. thank you. >> those remarks from house speaker john boehner. and more about the fiscal cliff negotiations with house majority leader eric kantor. >> what was your reaction? >> you know, i think we have said that offer is not a

serious offer. all of a sudden they're asking for $1.6 trillion in tax hikes and nowhere near that number in spending reforms. and what we've always said is we want to fix the problem. we want to make sure that we get a hand on these unfunded obligations connected with the into itment programs. we want to start the spending problem so we can then go about trying to manage down the debt and deaf sifment and we don't want to aggravate a struggling economy. we want to get people back to work, which is why again, we take the position that raising tax rates is absolutely not something that helps get people back to work. >> what was the importance of that, rather than just going ahead with visas that you agree are very, very important? >> well, again, what we believe is this was the first step forward in terms of trying to address the need for mot earnization in our visa laws.

and we have a system of lottery that, frankly, i think, is properly replaced with a system that rewards those who want to come here to help create jobs and help get our economy back on track. so it's very much, i think, in sync with our priority of helping americans get back to work, helping create more jobs for more americans. >> democrats have now said after your response towards the white house's proposal that the ball is now in your court, that the onus son you to put forth a proposal. is the ball in the republicans' court now? >> well, we remain committed at all -- at all instances to engage in discussions that are serious. i think that the proposal that was delivered here by secretary gitesdz ner to the speaker and me yesterday was not a serious proposal. we remain in discussions. i know the speaker as well as i do not want to see us go over

the fiscal cliff, but feel very strongly we've got to get serious here. we don't want to increase tax rates. we're not going to increase tax rates. and we want to do something about the spending problem. and remember, the good will, the piece that is, i think, determinive here, the speakers put new revenues on the table just after the election and said we get it. the president won his re-election. we wonelection. >> they know they need to put revenant on the table, but will and give them the entitlement cuts? >> we will take this as a serious matter. this is not a game. we are interested in trying to

solve the problem for the american people so that we do not see taxes go up on anybody, so we can engage in reform, get the economy going again. we're not playing a game. that offer yesterday was not serious. thank you. >> that was a portion of a briefing held earlier today. eric cantor talked about a bill that the house pass today that creates a new visa program. the vote was 245-139. the house is adjourned for the week, but members return at noon on monday. for more about that, we will now show you remarks from majority leader eric cantor and steny hoyer on next week's agenda.

mr. cantor on monday the house will meet at noon for morning hour and 2:00 p.m. for legislative business. no votes are expected on monday evening in order to accommodate the annual white house holiday congressional ball. on tuesday, the house will meet at 10:00 a.m. for morning hour and noon for legislative business. on wednesday, the house will meet at 9:00 a.m. for legislative business. last votes of the week are expected no later than 3:00 p.m. on wednesday. members are advised that this is a change from the original house calendar. mr. speaker, the house will consider a number of bills under suspension of the rules next week. a complete list of which will be announced by the close of business tomorrow. as members are aware, the house has numerous outstanding legislative items that we are actively working to resolve. first and foremost is the resolution to the so-called fiscal cliff. we are also waiting action from the senate on items like the annual defense and intelligence authorization bills and extension of fisa, and others.

negotiations on these and many other issues will continue regardless of the daily legislative business of the house, and members are advised that we will not adjourn the 112th congress until a credible solution has been found that meets these challenges. finally, mr. speaker, the 2013 house calendar is now publicly available at majority leader. gov. the house will convene the 113th congress at noon on january 3 and we will be in session for a total of 126 days. i thank the gentleman and yield back. mr. hoyer: i thank the gentleman for his comments. i appreciate his observation with reference to a number of pieces of legislation that are pending. and as he mentions in his comments, the fiscal cliff, of course, is of concern not only to us but the entire country. the negotiations as the majority

leader points out are ongoing and hopefully will bear fruit and hopefully will bear fruit in the short term. mr. leader, there are, however, some steps that we could take, i think, that would alleviate some of the concerns and apprehensions that do exist in the country. as you know, we have discussed before, the middle class tax cut, that is under the $250,000 that has been the object of discussion in the election, and continues to be the object of discussion here, i'm wondering whether or not given some of the comments that have been made, i know by mr. cole, tom cole, your former chairman of the campaign committee, republican campaign committee, and others, and the president's comments that i don't see scheduled but would urge consideration, mr. leader,

of the senate passed bill which will assure 98% of americans that they will not receive a tax increase on january 1. i don't see that on your list. i'm wondering if the majority leader could comment on whether it is possible for us to take up that senate bill to give assurance to the 9 % of the people who -- 98% of the people who will be affected by that bill. i yield to my friend. mr. cantor: i thank the gentleman and in direct response to the gentleman's question. it is not the intention of the majority leader to bring forward to the floor that bill for several reasons. first of all, madam speaker, the notion of increasing tax rates in an economy that still is struggling, where we have entirely too many americans out of work, is something anathema

to a job creating future. secondly, madam speaker, raising tax rates, asking americans, small businesses to pay more of their money into washington when washington cannot seem to get a handle on its spending problem, will just make matters worse. we've got to stop the spending madness. as the gentleman knows, that is very much what this majority has been about. we want to finally provide the fix to some of the entitlement problems, the unfunded obligations that we continue to incur daily in this country. madam speaker, it is not the intention for us to vote to increase tax rates on anybody in this failing economy, but we do look forward to continuing in our discussions with the administration, with the white house, the speaker and i met

with secretary geithner yesterday in hopes of trying to find some common ground so we can avoid the fiscal cliff so we can get back on to a road of confidence and job creation in this economy. i yield back. mr. hoyer: i thank the gentleman for his comments, madam speaker. i would just observe that the senate bill that i was referring to doesn't raise taxes on anybody. in fact, what it does is it ensures that no taxes will be raised on 98% of americans. doesn't refer to the other 2%, as i understand the bill, it simply recludes taxes from being increase -- precludes tax from being increased pursuant to the republican passed bills which sunsetted the tax rates that currently exist for those 98% of the people. from that standpoint i think the bill that i have been referring to, madam speaker, and i think the majority leader probably

knows this, is not referred to those over 250, which is what i presume he's referring to. i might also observe as it relates to his response, madam speaker, bill kristol, who i think the majority leader probably knows pretty well, and who obviously is a very strong proponent of policies put forward by the majority leader's party, said, and i quote, it won't kill the country if we raise tax as little bit on millionaires. he said on "fox news sunday." it really won't, i don't thifment i don't really understand why republicans don't take obama's offer. we know the president of the united states -- i want to tell my friend, the majority leader, the president of the united states has said he is not going to sign a bill. he disagrees with your conclusion. i disagree with your conclusion. and that's what democracy is about. .

the president of the united states has made it clear he won't sign a bill that reduces the tax obligations of those over $250,000 in the coming here. he won't sign that bill system of we can hold hostage the 98% which he will sign. which he believes like you ought not to go, the 98% of americans ought not to receive a tax increase because it would, from his perspective, dampen economic growth in this country. and now we have disagreement on the $250,000 and above. it's a legitimate disagreement. we can debate it on the floor and everybody can see where we stand. we believe that the majority agree with the president's and our proposition. but to say that we're not going to do something for the 98% because we don't want something

to happen to the 2% which by the way is not in that bill but the gentleman is correct, nor are they included in that bill, the 2%. but i would urge my friend, we're having trouble getting to agreement. i think that's unfortunate. i think the gentleman, the majority leader and i both want to get to an ageement. we don't want to go over the fiscal cliff. that would be bad for the economy. we both think, i believe, i hope, that we need to have a balanced agreement so we will not go over the cliff that would be bat for -- bad for the country, bad for the american people, we don't want to do that. the gentleman in my view doesn't not want to do that. put one way to give some confidence which is very important to the growth of the economy, is to assure, as tom cole, your former chairman of the republican campaign committee, said just the other day, and i believe you're -- in i believe your web meeting that he believes that this ought to be done.

we ought to give the 98% assurances. we can debate and the prevailing side will win. but i don't think there's disagreement on the 98%. i think we agree on that as i said before the election and i said after the election, we need to move forward on that. that's something that i think -- on which you and i can agree, the democrats and republicans in this house can agree, that the senate an agree to. there was a bipartisan vote to let that bill come to the floor. i would hope we could at least do that so we can give at least that on which we agree the opportunity to move forward. i yield to my friend. mr. cantor: i thank my friend.

where we don't agree is asking anyone to pay more out of their paycheck to washington when washington seems to be incapable of getting hold of its spending problem. which is why, madam speaker, we continue to ask those present in the gos to be specific with us. we want to address the problem. we realize we are digging the hole deeper every day. and the taxpayers are on the hook. that's why we say it is now not the time to ask anyone to pay money into washington when we keep increasing the debt the way we are. and so there is not agreement that we ought to raise taxes. there's not agreement at all until we get the problem fixed.

that's all. so we can see eye to eye on this but let's all start where we know we've got to go which is addressing the spending problem and then finally we could perhaps fulfill the promise of rebuilding the confidence that people need to have in this federal government. i yield back. mr. hoyer: madam speaker, i don't know that i'm making myself clear. the senate bill raises taxes on nobody. nobody. the senate bill simply says, for those making less than $ 2000 -- making less than $200,000 individualry or $250,000 as a couple will not receive a tax increase. the gentleman says we're not in agreement -- mr. cantor: will the gentleman

yield? madam speaker, just imagine that those individuals the gentleman likes to say are perfectly willing and capable of pay manager taxes, the small business man or woman who may make over $200,000 a year individually that individual will see a tax increase come january. if that bill is passed or nothing is dope. so madam speaker, i know that the gentleman can be technical in his argument and say there's no tax increase but the end of fact of passing that bill as if it resolves a matter would mean an increased tax bill for a small business man or woman a working man or woman, at that income level. so let's be honest about what the impact of saying that that bill is the final resolution here. the gentleman knows that is correct. so again, we've been through this.

all i would say, madam speaker, to the gentleman, is we are earnest in our desire to want to resolve things and we are earnest in our statement that we don't want to go over the fiscal cliff. we've got to come together and solve this problem. allowing tags tack -- tacks to go up on a certain portion of the population doesn't just fix the problem. the problem is in the spending. and the gentleman knows that. he's been a real committed deficit hawk he continues to say, we've got to pay for what we buy. well, we bought these incredible entitlement programs and they've got to be sustained for the people relying on them which is why we want to save them. that's solving the problem. that's where we need to go in this. i yield back. mr. hoyer: i thank the secret for yielding back. madam speaker, again, the gentleman says i'm technical -- technically correct, i presume that means i'm correct.

the bill i'm asking to be brought to this floor to pass will not raise anybody's taxes. what the gentleman is saying is unless we deal with the 2%, the 98% are going to be held hostage until such time as we deal with the 2% theasm problem with that in a democracy, we have a disagreement on that and as a matter of fact it was pretty clear to the american public that there was a very significant and unclouded, not confusing, difference between the two candidates for president on the very issue to which the gentleman speaks and the american people voted. and the gentleman, the president of the united states, who said no, i don't agree with that, won the election. he won the election. and he is saying, i'm not going to sign the bill on the $250,000 or above. my problem, mr. leader, is i understand your conclusion is that if you pass the 98%, that you won't have a bargaining

chip with which to press your point on the over $200,000 individually, as you correctly observed. i understand that. but frankly, the bargaining chip is somewhat illusory in that the president said absolutely he will not sign that. why? because he wants to bring down the deficit. he wants to -- and has agreed to, and we've agreed to, over $1.7 trillion in spending cuts already for 2011, 2012, and 2013 and for the next decade. or at least until 2022. we've already agreed to that you press that, you were -- you pressed that, you were successful, we agreed on many of those. some we didn't agree on. but you had the votes, we needed to reach an agreement and we reached an agreement. we've cut almost $2 trillion of

spending already. you're correct. we need to assure the fact that we pay for what we buy. and if we don't want to pay for it, my view is we shouldn't buy it. frankly, those tchash principle applies in my opinion to tax eexpenditures as well as to buying stuff. it all reduces your -- -- reduces your ability to pay for what you're buying. it's not that i'm technically correct, i'm correct. the bill i'm asking you to pass will simply give to the 98% of americans, taxpayers, the assurance that their taxes will not go up on january 1. if we dent don't pass it, they won't have that assurance. the confidence level will not be good. the stock market will be concerned. and yes, swreel to deal with the other 2%. that's clearly going to be part of the discussion. and i think ultimate resolution of the -- hopefully an agreement.

but my presumption is the reason tom cole made that comment just a few days ago, and it's not like he's a back bencher, he's the former chairman of the republican campaign committee, said we ought to do this we ought to get it off the agenda to give the people confidence. he called it a christmas present to the 98%. i think it's a judgment that our economy will be better off if we do it. so to that extent -- i'd be glad to yield to my friend. mr. cantor: i don't want to belabor the point. but i didn't say the gentleman was technically correct, i said he's being technical in his argument. i then went and made the case that the real impact of what the gentleman is advocating is that taxes will go up on many people. those job creators and others. that was all. madam speaker, again, i understand -- mr. hoyer: if i can, there are a couple of other issues i know

the gentleman indicated, didn't include one, i think you didn't include the farm bill. can you tell me what you think the stat toufs the farm bill, as you know, again, we have an issue where the farm bill passed 64-35 in the senate, 16 republicans voted for it and frankly the farm bill in this house passed out of your committee 35-11 on a bipartisan vote. that's not been brought to the floor. can the gentleman tell me what he thinks is going to happen to the farm bill? i yield to my friend. mr. cantor: i tell the gentleman, the speaker and i both said we will deal with the issue of the farm bill or the issue of -- the issue in and around the farm bill before leaving this year. i would tell the gentleman, it is our sense that the farm bill, in being brought to the floor, in regular order, does not have the votes to pass this house. and we understand the importance of the issues surrounding the farm bill and working with chairman lucas. and others.

on both sides of the capitol. we look forward to hope any reaching some type of resolution on issues surrounding the farm bill prior to leaving this year. mr. hoyer: i thank the gentleman for that response. i'm hopeful that we can in fact proceed on that. farmers of america and obviously if we don't pass something by december 31, on january 1, price support pricers in federal government will go up very dramatically as the gentleman knows and it will have an impact on spending and i know the gentleman and i are both concerned about that. next to last issue, just two more issues quickly if i can, mr. leader. we talked about the violence against women act. we passed a bill through this house that was passed essentially on a part sab basis. they passed a bipartisan bill in the senate, violence against women and domestic violence of

is an ep democrat nick some respects in this country. i'm hopeful that we might consider taking up the senate bill again because that passed in such an overwhelmingly bipartisan basis in the senate. i would suggest to the gentleman that it may well pass on a bipartisan basis here as well. the problem as you know from my perspective and our side of the house bill is that you exclude a number of people. the problem with excluding people, for instance, undocumented immigrants, from being able to come forward and have a sense of safety and security in doing, is that the abuser of the undocumented immigrant left unaccountable may well be the abuser of a citizen or child in this country either as a citizen or here legally. there are we think there ought

to be oa -- a broader coverage and apparently the senate shares that view. every republican woman and democratic woman voted for that bill in the nat -- in the senate. does the gentleman have any idea whether either we could go to conference on that bill or whether or not we might bring the sthath bill up for passage? i yield to my friend. mr. cantor: i tell the gentleman, madam speaker, that the chair is actually the author of the house bill and the house bill was passed out of this house, it has broad support, it was a bill that did not intend to target any specific group, it tried to streamline the grant making process so that the benefits designed to address the needs of apused women and others could reach the victims. and i am committed to seing if we can get this bill done.

the gentleman knows, madam speaker, that the senate bill has a blue slip problem. the senate's bill is not over here. so we continue to negotiate and discuss ways for us to resolve this prior to the end of the year. the vice president and i have even spoken because it's an issue very near and deer to -- tear to his heart, to see how we can resolve this. i commit to the gentleman that i am looking to see this resolved and passed by the end of the year and to see where we can -- if we can land in a way that preserves most of what that bill is about that we can have in common, rather than emphasizing the areas of difference. mr. hoyer: i thank the gentleman and thank the speaker for her leadership on this issue but i thank the gentleman for his assurance that he's focus odden this, going to work on it. i look forward to working with him on this bill which i think is a very important bill for us to get passed before we leave

here. lastly, obviously all of us know that sandy visited the -- hurricane sandy visited extraordinary damage on a large portion of the northeast. i come from maryland and we were not very substantially damaged but obviously new jersey, new york, and connecticut in particular, can the gentleman tell me, i know the administration has -- administration has not come down with a number that number i presume will be well north of $50 billion, but this is one of , in terms of the estimates being made, one of the five most damaging storms to hit the coast of the united states of america. i'm wondering whether or not the gentleman might have in mind doing some interim at a figure substantially below what we know will be the ultimate figure and in the next three

weeks before christmas and then could the gentleman tell me whether or not if we can do that, whether or not the gentleman would require that it be offset and i yield to my friend. mr. cantor: madam speaker, i tell my friend that the best policy is to rely on the administration and fema to come up with the most accurate prediction of what the cost are before we move. so that would be in response to the first part of his question. secondly, as the gentleman knows, when we passed the budget control act last year, it had in it the mechanisms to actually budget for disaster relief. and imposing a formula of a 10-year rolling average, allowing for the preservation, if you will, of those dollars dedicated to disasters was what we accomplished there. and it is that process that is much different than prior to

the b.c.a., and i think obviates the need for the discussion he wants to engage in with regards to offsets. i yield back. mr. hoyer: all right. lastly, let me ask you, mr. nadler has a resolution, i think mr. grimm and mr. king -- i'm not sure they're on the resolution but i presume they're on the resolution as well, so it's a bipartisan resolution, expressing condolences to those who were devastated not only in terms of property but some, of course, loss of family members and life, whether or not that resolution might be brought to the floor so that this house could express its regrets and condolences and sympathy with those who were so devastated. i yield to my friend. mr. cantor: i tell the

gentleman, we did observe a moment of silence in those who lost their lives in that horrific storm to hit the east coast of the united states. certainly all of us, our thoughts, our prayers, our sorrows go out to the loved ones who have lost family members, friends in that awful tragedy of a storm. i am not -- i have not looked at mr. nadler's bill >> president obama spoke in pennsylvania today calling on congress to pass an extension of tax cuts for the middle class. later in the day, john boehner of s on to the president's comments. you can see both events starting at 8:00 eastern on c-span. in january, tax credits are scheduled to expire, along with

tax credits for businesses. we look at the issue this morning on this morning's "washington journal." host: we are looking at various aspects at the so-called fiscal cliff. joining us for the discussion is steven sloan. he is with politico. could you define what a tax credit is and how that differs from a tax deduction? guest: credits and deductions are used to lower somebody's tax bill. if you have it $1,000 tax bill -- basically reduces taxable income, so it takes the taxable income off the top. if you have a $1,000 tax deduction, that is basically a $250 deduction.

host: on their tax credits that specifically affect families? guest: some that have expired that are part of the fiscal cliff package. guest: some that have expired that are part of the fiscal cliff package. they get much less attention than the bush tax cuts. they are part of the packet of decisions that congress has to make. host: we can go into debt but to highlight four -- let's start with the child tax credit. what is it? guest: this is a credit that applies to families, some that you can use if you make up to $130,000. it is they $1,000 credit for

each child. unless congress acts, that 10000 tax credit will become $500, but becomes less valuable. you can make up to $130,000. host: that is the child tax credits. guest: almost 24 million families claimed it in 2009. it is one of the bigger tax credits out there. host: the next one would be the child and dependent care tax credit. guest: is a credit between 20% and a 30% and goes up to $3,000. it helps families with their expenses for child care or if they have dependents and things like that. you can basically claim a credit of $3,000. host: for child care purposes? guest: this helps with dependents. host: the earned income tax credit is what? guest: it is a credit whose primary recipients are working parents with children. this is something that is designed to help the low-income

families help them have lower tax bills and get money back from the government at the end of the year. host: the phase-out begins at $5,000. to elaborate on what that means? guest: it is something that is aimed at the lower income people scale. that is what we're looking at. host: the final one deals with education. guest: this can about during the stimulus. this is a tax credit for education expenses. it expires at the end of the year unless congress extends it. host: when do these impacts take place if nothing is done in december? guest: most of these end at the

end of 2012. this would affect people in january. host: what is the benefit for the treasury department? guest: the treasury would get more money. that is money that is no longer coming into the treasury. it is real money. the child tax credit claims in 2009 totaled about $20 million.

you can get a sense of how much on the treasury would have gone if that credit were not in place. host: is there a sense of what this has cost the treasury? guest: several hundred billion dollars. host: is a large part or is this a side issue as other things get debated? guest: most of the discussion is what happens to the top two tax rates.

that's where most of the political attention is right now. these are important issues for families. they haven't quite gotten the attention yet. host: lower income, middle income, that is where we're talking. guest: this is the heart of tax policy for low and middle- income families. this is if you're making tax policy at those families. host: steven sloan is our guest as we talk about tax credits. if you want to join us and ask questions about the specific credits, here is a chance to do so. here are the numbers. 202-585-3880 for democrats.

202-585-3881 for republicans. 202-585-3882 four independents. journal@c-span.org is our e- mail. what is the sense of congress? guest: nobody wants to take away tax incentives for lower or middle-income americans. these are things that cost money. the tax code isn't the place to help families raise children. there are spending programs and things like that. there has been a lot of debate over this yet. you could see some more. host: steven sloan is our guest and he is with politico, senior tax reporter. our focus is looking at tax credits. first call from oklahoma,

daniel. caller: i just had a question. if they are allowed to let this go over this fiscal cliff, are we going to not have these tax credits for the upcoming taxes we are filing for this year? and also, will congress be able to take their vacations this year even if they do not do their jobs? guest: these are mostly things that will affect the next year. most of these tax credits were in place for 2012. it affects your 2013 tax bill which you pay in 2014. the congressional schedule is very much up in the air. everyone is figuring out when they can go home. there is nothing official yet. you could be here very much their christmas eve. host: ann from florida, good morning. caller: good morning.

i like to ask steven sloan. he is an incredible guest. i'm in my 50's in florida. i take care of my grandson. what i'm asking you is your generation will not have to be on top of these issues. i appreciate all that you do. if you were at my age and you refinanced your home and had good credit, and all that money that goes for paying into the refinance of your home, is that still a deduction as the east today if you refinanced your home? i'm talking the primary home. host: are you affected by the

tax credits we're talking about today? caller: i am disabled and i had bone issues. my husband does take one deduction and i take care of my grandchild. my children are married and stable. host: thank you for the question. guest: the mortgage interest deduction is still available to you. it has not gone away. the mortgage insurance deduction is a logger in place. you can still claim the mortgage just deduction.

host: does it have to be from a recognized day care provider? guest: there are some rules but i think they're pretty flexible the irs has on its website. host: roy is next from indiana on the independent line. caller: he has entered some of the questions. you're talking about the mortgage exemption, the money you pay on your mortgage. i have never been able to claim that and i'm 78 years old. i understand the republicans want to do away with that. is that correct? guest: i think no one wants to

get rid of the entire mortgage deduction right now. we're hearing talk about whether you would cap the overall amount of the deduction that somebody could claim. this is an idea mitt romney had on the campaign, this idea that you cap the value at $30,000, say. if you live in an area with low housing prices, that probably would not affect you. if you live at new york, san francisco where your mortgage is more expensive, it would be easier to bump up against what the deduction cap would be. you might not be itemizing your tax returns at the end of every year. host: next call is mike on the democrat's line. are you there? caller: i have a question for you.

i heard president obama is making cuts to medicare if his plan goes through. he wants to cut $400 billion in entitlements. i collect ssdi. i am disabled. these $40 billion cuts in entitlements, are they going to affect ssi, ssdi? guest: we do not know what the administration is talking about yet. that offer came from the administration on the hill yesterday. it was not specific. $400 billion is what we are

looking at in entitlement savings and we're not sure if it is ssdi or how beneficiaries would be affected. host: children make up a lot of these credits. which of these are affected by the amount of children you have? guest: some of them do matter. the eitc, there was a law that allowed you to climate for more than three children. that could go away by the end of the year. host: the earned income tax credit specifically. mary from kentucky on the republican line. caller: good morning. we are small business owners.

with many of these taxes going up and there are proposals in kentucky to raise some of our state taxes because we have deficits and pension obligations. not only will we be hit with all of these federal issues but we will be hit with the state issues as well. and i think that we are getting close to breaking point with these additional obligations. i do not think that president obama and the people who are advising him really have their finger on the polls of what it will mean for small business owners. that's what concerns me. people like us have been able to cope and still have been able to save and to send our children

to college. that is close to going away and this is one of my great concerns. guest: one of the untold parts of the story and sometimes we overlook what is happening in the states. they're raising state and local taxes to solve their deficit problems. something to keep in mind when we talk about these detention caps. you could be pushed up against a deduction if you live in new york. if you live in new york and have high state and local taxes, if congress moves forward with a deduction cap, you could go right up to that cap. host: 24% of those were claiming the earned income tax credits. 13% climb in the child tax credit. these credits, you can use them simultaneously.

guest: some of these are refundable which means you get money back even if your tax bill is zero. whatever the refundable amount is, you get to take home. host: we will go to ray in atlanta, georgia. caller: how much will an individual or can an individual receive who has two children in a single-parent household? what is the maximum amount of money they receive back in the form of tax credits? once you look at that and if there at that dollar level,

we're finding their children for free and reduced lunch and i assume adding some additional money for their housing. what is the maximum amount of money a person can receive? guest: i do not think there is an easy number 2.2. so one can receive $50,000 on these credits when they combine them. there are other programs out there like free lunch at school that goal in combination with these tax programs to support low and middle-income families. host: loretta from cleveland,

ohio. caller: good morning. do you know how many corporations in america file for the republicans corporate tax cuts each year? why aren't they means tested? corporations with billions in profits should not get tax cuts. they have enough money to pay their taxes. my second question is about the mortgage deduction. i think they should be only on the primary home. senator mccain has seven homes. i you telling me he is getting a deduction on all seven?

that is class warfare. guest: the mortgage interest deduction is mostly focused on your primary home. you get phased out, if you will. the corporate tax code is not getting a lot of talk because everybody is focused with what happens with the top two brackets of the bush tax cuts. companies are lobbying congress to push down their tax rates by as much as 10 percentage points. i don't think is going in the direction that the caller wants. host: a comment from twitter. eric from fairfax, virginia, is next. caller: i'm confused by congress is not willing to look

at the root cause of the troubles that we are having. the fiscal cliff -- this reserve system that our monetary policy drives us to use it, the notion of creating something from nothing, i think that's what we need to focus. the problem is not what taxes going up or down, nor does it have anything to do with what the government gives or does not give to the people. congress is not thinking out of the box. i think it will be the status quo and i'm disappointed. guest: it is important to talk about fiscal policy and monetary policy. congress doesn't have that much control over what the federal

reserve is doing. there has been anger about how the federal reserve has reacted to the recession and a lot has happened on capitol hill. congress' hands are somewhat tied. host: paul joins us on the independent line from florida. caller: good morning. i have a question concerning the home mortgage modification program. i'd like to know if you can explain the relationship of this big fiscal suicide we are about to enter. it seems to me that there is an iou in the treasury for close to $4 billion due to the lock box since al gore brought it up.

guest: democrats are pressing for some type of mortgage element to the fiscal cliff. the administration has offered money for housing refinance program. it will be important to see where that goes. host: the child tax credits. has has it been supported by those in congress? guest: is this what the tax code is here for? is it meant to help subsidize families that are trying to raise children? of focusing on the money you need to bring it to run the government. that is essential element with all of these tax programs. host: tax credits and how you might be affected if the fiscal

cliff happens. steven sloan from politico is joining us. willie from chicago is next. good morning. caller: good morning. my question is -- hello? host: you're on. caller: if a company is being paid by the government, a tax credit for a guy to work for a company and the state turns around and paste the government to keep the company in a certain state, is that like the government paying for this guy to work for the company? guest: you have federal tax programs that incentivize companies to hire veterans are

people that are disadvantaged or maybe people who live on food stamps. those companies can get state incentives to locate in a certain part of the state or to locate to another area and those programs often have interactions. host: gilbert is next. caller: i understand there is a lot of fussing about oil companies getting subsidy from the government. exxonmobil pace multi millions of dollars in federal income tax every year. what exactly is this subsidy that the oil companies are getting? guest: there are a host of tax incentives for oil companies. these tax incentives basically

allow them to pay less on their equipment and things like that. they do get a lot of attention. congress has tried mulled betimes to limit the tax benefits for the top five oil companies. it has not passed because of opposition. mary landrieu said she looked through this as part of a broader package. the small businesses -- if you're organized as a partnership, they are not corporations. you claim your business income on your individual tax returns. if that business income kicks

you over $250,000, you almost certainly will be subject to higher taxes in january. host: paul, good morning. caller: good morning. thank you for taking my call. i would like to know what these rates would go up to for the individual taxpayer if we do go off the fiscal cliff? guest: if we go off the cliff, the rate will go up to 39.6%. the low bracket will go away and the lowest tax bracket will be 15% if we go off the cliff. 15% to 39.6% if we go off the cliff. caller: what about the other rates? host: we have a question on

twitter. guest: you don't pay taxes on losses. a you're making profits and picture up over $250,000, that could result in a tax increase that kicks you over $250,000. caller: we need jobs in this country. i hear all this money being talked. the average worker -- i am lucky i get 30 hours. they're cutting down to 20

hours at wal-mart. i had a good manager. i notice a woman comes in. she says we can get anybody to work. you talk about the tax credits. most of us have no chance of getting anything like that. this is too low republicans and democrats. fascism and communism, it was always party first. that's what our country has come to. we have to come together as true conservatives and true

democrats and come together. guest: one of the big lessons we should take away -- we should look at whether these tax incentives result in hiring because these are often temporary tax incentives. is it going to push an employer over the edge to hire somebody? is this a deciding factor to make somebody hire somebody or would they have hired them regardless? the government has essentially lost money. host: there are a lot of tax credits that expired in 2012 and some of them go by the work opportunity tax credit. activated military reservist.

what is the scope in terms of tax credit for small businesses? guest: the scope of guest: the scope of tax provisions that expire, it is massive. it is long list and hard to keep track of them. the work opportunity tax credit is one you mentioned and that was something that expired at the end of 2011 that is up for right now to see whether that is something that can be extended again. is something that is the tax credit that applies to companies and gives companies a tax credit for hiring disadvantaged workers, people on food stamps. it is temporary tax policy. host: it rundown of tax credits that would affect you if the fiscal cliff happens is what

we're talking about with steven sloan with politico. we have about 20 more minutes with our guest. you have a story and talk about this visit. what we're talking as far as what the white house is offering? guest: they want an immediate increase for the top earners, the 35% rate going to 39.6%. about $960 billion in immediate revenue. the administration is seeking $1.6 trillion.

the rest to come sometime next year as part of tax reform. host: this is the first time republicans are hearing from this from the white house? guest: you could argue the first time since the white house that a member from the administration is going to the hill. this is a senior administration official that is coming to the hilt to present what the administration wants to do. host: what happens now? guest: republicans rejected this offer yesterday. it will be interesting to see whether we see some

negotiations take place like what we saw during the debt ceiling talks during 2011. also if a start seeing message bills coming out both chambers. both chambers have done plenty of the message bills on this issue. we will be looking to see if the house passes a bill again. that would extend the rates for everybody and if the senate passes a bill just for the middle class. we'll look to see if any of that takes place and if we are moving towards a deal. host: jay the republican line, go ahead. caller: thank you for taking my call. they should do away with all tax credits.

both parties are the same -- they like to spend to keep in power. why don't they take a 20% deduction and do away with 20% of the government? there is also other taxes like gasoline tax, phone tax. we pay a lot of money to foreign countries that we do not need to. as i think about taxes. guest: this is kind of one of the ideas that republicans talk about, and democrats talk about when we talk about moving to tax reform. it is getting the individual provisions. right now it is a complicated mess. the kind of start over with a simple system that has a few

income brackets. easier said than done. that is one of the goals here. host: jim from twitter says -- guest: absolutely. a lot of these credits and deductions, the standard deduction exceeds what you would get, that you just take that. host: the specific credits we have been talking about prompt a question from cindy. guest: yes. you generally have to be working are working outside the home. host: is there an hour requirements? guest: there are a lot of specific requirements. host: kay from richmond,

virginia. caller: if somebody is working as hard as they can and making less than $50,000 a year, they count on this refund every year as a savings account, maybe. instead of doing away with some of the benefits that people are getting for free, why are they getting money that equals or - what you're making per hour. you're getting a benefit taken away and they are still getting as much as they did. guest: this is a hard balance for congress to strike. how much do you want to give people in credits and how that in directs with other welfare programs. there have been efforts to rein in those programs as the

recession has tapered off. host: sonya on the democrat's line. caller: thank you for taking my call. it is my opinion that the situation we find ourselves in with the lack of revenues and our taxes is simply one of the flaws and the in sustainability of supply-side economics and trickle down economics. it will not work. let me explain myself. when you do the trickle-down and take the money straight up to the wealthiest and expect them to come back down and trickle the money down through the system, it is not working.

we have gone from wages of stagnation and jobs have been shifted elsewhere. if you started with a strong economic base where you had the money starting with the working class and then it would get taxed there at the state, local federal level. it would be spent. those people, the items they bought, it would be taxed again there and on up. and each time, it would be taxed. we would have the revenue for infrastructure and the programs. yourhang up and listen to comments. guest: it will be interesting to see how this works out going forward. the role of tax policy in government was a big issue

during the recent election, whether we should have tax policy that some people skews towards the wealthy or helps corporations more than individuals. that's a lot of what this election was about. it will be interesting to see if anything changes. host: "the san francisco chronicle" talks about the tax issues. does that fall into a category of things that might be considered? guest: there is some many moving parts.

host: family tax credits -- host: any sense that that is on the table? guest: there are so many moving parts to this. host: you did know that existed. guest: you can go to the joint committee on taxation's website. they have a full list of all of these credits and deductions and how much they cost over time. there is a good explanation of a lot of these tax deductions and credits that are in play. you think of the cbo for spending. they are non-partisan body in congress that deals with economists that look at what congress wants to do something

related to taxes, here is what it would cost and how much it would do. caller: hi. i'm 52 years old. i just have a question, a general question. they are talking about the rich people. i'm not rich by self. the rich people not paying their fair share. i do not see how that came about. it seems the poor are not paying their fair share. i paid to plus 5% last year -- i

paid 2.5% last year. because i got an education credit. the comment on how they can about that. guest: there has been frustration in the aftermath of the recession as to whether the recession has been devastating. there's been a frustration about whether tax policies have helped top earners and not doing as much for the middle class. we got cut off in the campaign talking about the 47% and what that meant. they are paying payroll taxes and things like that. just not paying the income tax.

host: tom, go ahead. caller: hello. i like to ask a question as far as the obama health care takes affect. will the benefits if an employer pays your insurance be considered in come and taxed accordingly? that's my question. thank you. guest: as of right now, it would still be protected from taxation. that is something on the line as part of tax reform. host: we're talking with aaron, good morning. caller: looking at tax credits

on this thing and looking at reducing some of the extraneous taxes that are out there and then we get a tax credit for them? host: can give an example? caller: no, because i have somebody prepare my taxes. they are not a big amount. we're being taxed and taxed again, if that makes any sense to you. guest: that proponent of the tax reform talks about their so much in the code that is extraneous and unnecessary. to hold down to something less unwieldy than will we have today. host: mark on the independent line, hi.

caller: i appreciate you taking my call. i'm 42. every time there is an election, every four years, there is a big squabble about the unfair taxation. many callers: and the fair thing would be everybody to pay an equal tax. nobody will be left felt that they are being taxed unfairly if everybody was paying the same. the poor don't have to pay and the rich don't have to and the middle class pays the bills. and we expect in the federal government to resolve everything? we're still squabbling about how to pay for medicare, medicaid, texas, illegal immigration. nothing in my generation's

concerns have been resolved by the federal government. they cannot be found liable. what do we do as individuals? get out from under the federal government? guest: the call reflects a frustration that members of both parties have that congress keeps on ticking the can down the road and tax policy is perhaps the biggest example. we have this dec. routine every year where there is a meltdown over tax policy. in 2010, but it was what to do with the bush tax cuts. this time last year we were talking about what to do with the payroll tax cuts. you have to wonder if we're headed toward a reckoning. you have to wonder whether

we're heading to some type of big decision that would solve some of these problems for the long term. when we go through such year by year, month by month policy debates, it creates an incentive to sell these once and for all. host: vivian makes this point on twitter. the white house wants to make the tax code simpler. that has been floated in years past by other administrations. guest: it is hard to do tax reform. biggest ticket items are the mortgage interest deduction, the protection of the employer- provided health care, things

like that. it is hard to go after those in any political climate. there is so much talk about capping deduction. that is a way to do tax reform but not make these hard decisions. you're making it harder -- or reducing its value. host: the changing of the tax code. "the baby boomers are now in full retirement mode." guest: it is import to think about 2012 or 2013 is from 1986. the 1986 tax code overhaul was paid for in part by raising taxes on corporations and investment income. it is hard to see that happening today.

we saw that during the campaign. corporations are trying to lower their taxes. it is hard to replicate that kind of thing. there was more good will in 1986 with tax reform. we came off the social security deal in 1983. there were some real bipartisan successes. it is hard to see a track record in this climate. caller: thank you. i keep hearing the number $250,000 as the cutoff for the

wealthy, if you will. for those of us in middle class in the dc area, that is not wealthy. i heard senator kane in that number to $500,000 and i wonder about the possibility of that proposal being adopted? guest: that is something we will see it play out as these negotiations come to a head. people talk about the threshold as being too low. $500,000 is something the democrats have supported in the house. we look at the threshold because that is where you get a lot of revenue.

as you move the threshold for their up, you're getting less revenue. host: ellen on the republican line. spring, texas. caller: i have a different kind of question. the earned income tax credit is more beneficial for unmarried parents and for low-income, married, working parents. what does this do to traditional family values? guest: if you're married, you get less of a tax credit then you would if you're a single parent. there have been efforts to reduce those kinds of effects going forward. caller: good morning. you made a statement going over

the cliff. if you went over the cliff and turnaround and they reset the rates -- the lady from kentucky talk about how obama had raised her taxes. she has gotten more tax breaks since obama was president -- she pays a lower rate than she did for the past 60 years. guest: in terms of the retroactive application --there is a possibility we could come back in january and say we will reinstate those tax rates for everybody except those people making more than $250,000.

host: we have about 30 seconds. the likelihood these credits will be reduced. guest: it will be a crapshoot. host: steven sloan from politico. walking in the other series about what may be affected because of the fiscal cliff. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> president obama spoke about the fiscal cliff today. later in the day, house speaker john boehner responded to the president's comments. you can both of them starting at 8:00 p.m. eastern on c-span. tomorrow came a memorial service for warren rudman who died earlier this month. we will hear remarks from vice- president joe biden and several others as they pay tribute to

their friend and colleague. here's a portion of. >> wind i think of warren, i think of the psalm of life by law for -- by longfellow. lives of great men remind us we can make our lives sublime and in departing, leave behind us, footsteps in the sands of time. warren rudman left foot steps in the united states senate and in the sales of time. many people serve here and are soon forgotten, but he is not one of them. the reasons are quite simple. one, he was admired. he had courage and principals. he got there was done. he made a most happened. he cared more about his country than he did everything else. as a result, his country cares

about him. we care about him. that's why we're here. that's why we honor him today. it's a great privilege to have my name associated with warren rudman. >> you can see the entire service saturday night at 8:00 p.m. eastern on c-span. next, a senior policy advisor discussing democratic efforts about the filibuster in the senate. proposed changes to the filibuster rules. several believe it's a powerful tool used to frequently by both parties to block or delay senate action on a bill. at the heritage foundation, this is one hour, 15 minutes. what think you were joining us in the auditorium. we welcome those of you joining us on heritage.org. we ask everyone in house to make

the last check that your phone has been turned off as a courtesy to our speakers. we will oppose the program within 24 hours on the home page for your future reference. those listening online are welcome at any time to send in comments or questions to speaker@heritage.org. posting our discussion this afternoon is mike franc. he helps members of congress in the executive branch understand and offend conservative principles and exercise constitutional powers. he previously served as the director of communications for a member from texas. he served in the office of national drug control policy and legislative counsel for a former member of california. please welcome my colleague, mike franc.

[applause] >> welcome heritage. good afternoon. there are two types of people in washington, those who really enjoy deep discussions about senate procedure and those who don't. welcome. i can see which category you fit in. this has become more and more important as we move forward. the dividing lines seem to be more stark yet obvious than at any time i have been in washington. we have four experts that will discuss the developments. the discussions will talk about president and the distinction between the two -- talk about the precedent and the distinction between the two.

these individuals have a depth of experience that i think is unrivaled. let me introduce you before it turned over to the discussion. james wallner speak first. he has worked in the house and senate iand is currently the executive director for the senate steering committee. he is an agile to professor at catholic university. he has a degree from the university of edinburgh from scotland. he has authored numerous publications. james is a very astute observer of the day-to-day actions in the senate. the second speaker will be norm ornstein, who does not need much of an introduction. he writes a weekly column. he is an analyst at cbs news. he is the author of several

books, which may have read, "the broken branch -- how congress is bailing america." "it's even worse than it looks -- how the constitutional system is divided over extremism." he has been an quoted many times. i recall an article in the 1990's where he was quoted for , "i have no idea." if you can get quoted for that, you have a unique status in washington, d.c. next will be bill wichteman. burlington he was a special assistant to george w. bush -- formerly he was a special assistant. here was a policy adviser to bill frisk. he has a very deep experience in

matters in both the house and senate which makes and somewhat unique. he has been at the top of the pyramid in both chambers. his time with former senate leader frisk is a help. he hashe has also worked in the santorum campaign. the fourth and final speaker will be brian darling, who is here at heritage afor the time being. he is a senior fellow at government studies. he mahler -- monitors political events and assess this impact on policy decisions on things in general. he is a prolific media presence in talk radio, cable tv, and he has columns in other

publications. he is one of the most widely quoted analysts here at heritage. he served previously in the senate for senators martinez, and two other senators. we will start off with james and move on down. thank you. >> good afternoon. please bear with me. i am slowly getting my voice back. first, thank you to heritage, to mike, and my fellow panelists. i thought i would start off with two quotations which might help us free and the discretion that we will have and at least my comments, and then i will lay out what i think is a way to view this issue we're discussing today, a question of obstruction and in the

contemporary senate. the first quotation is from a book, from william riechart. you can convince other people to persuade you and then you vote and you win. the winners induce more than political persuasion, because they have set up in such a way that other people want to join them. even without any precision at all. this is what political strategy is about, structuring the world so you can win. that is the first quotation. the second is from our current majority leader harry reid, and he said in 2010, the republicans have had lots of opportunities to opeffer a menace.

we will allow them to offer amendments. they are only willing to offer amendments they will win. i think this is a good way to start off the discussion of obstruction today, and the conventional view of many of you are aware of, the way that most people in academia and the media and on capitol hill think about obstruction. the minority party in the senate have a lot of procedural ways under the rules with which to theruct the agenda despitof majorities. parties have become increasingly polarized. that induces the minority in the senate a willingness to use those prerogatives to obstruct the agenda of maturities because doing so is perceived to bring

them electoral gains. lastly, this results in gridlock. this seems like how people talk about obstruction today. with that, i want to go back to the second quotation. when he said this on the floor of the senate, it was two years ago, and it was a situation very much like today, the pre-fiscal cliff, or fiscal cliff 1.0. tax cuts were about to expire. the democrats did not want to extend all of the tax cuts. harry reid was trying to create an impression that it was the time that republicans were obstructing the process, obstructing what the democrats wanted to do. what he was trying to do was set the agenda and create an environment so he could win politically. he set up after this quotation a rare weekend session in the senate where he had two votes

. no republican amendments were allowed, and he showed republicans were obstructionists and would not go along with what he thought was good for the country. this was a ploy designed to shift attention from the democrats' ability to go along with what republicans wanted to do to republican saying they did not want to do what democrats wanted to do. he was seeking to control the agenda. that is the real issue here. there are times when minorities of both parties will obstruct the majority because they need or want to. the real issue in the debate today is one of agenda control. -- we have a way to think about this. in political science, if you look at the way house majority participate, it tells us about the way the senate majority is trying to behave today. they try to structure the environment so they can win, and they do so, but controlling the

agenda at preventing the minority from participating in the process. that is not a surprise to anyone. that is what is being done in the seventh, and that is not how the senate has traditionally been run. there is a number of tools they have at their disposal to do this. the first one is filing closure. filing culture is something that is done out of weakness on the majority party -- prepared is a tool for the majority provide certainty in the process, provides a symbolic gesture on their part to create a demarcation that is clear. it is the only way in the senate you can do those things. in the house to conduct with a closed rule. more egregiously cannot we have this thing called same day cloture, where the idea is the bill is on the floor, the party

filibusters' it for a while, and then the and ciardi, it's down and says which cannot get anything done, so i will file cloture to end the debate. this is doubt obstruction. same day cloture happens the same day it is brought to the senate floor. in the 110th, 111, and 112 congresses, same day cloture exceeded all other motions. you get the idea. i find it hard to believe you can say in every single circumstance the minority party is filibustering a bill because cloture is been filed. that is what the majority leader will have us believe. those are all indicative of minority filibusters. he also fills the tree. this is an important thing.

this strikes to the core of the minority's current criticism with a made the majority runs the senate. for those of you who do not read the precedent, killing the tree is the majority leader using his formal tool which is the right to recognition to offer amendments to a piece of legislation to exclude other amendments. once he has offered all amendments required, no other member can offer an amendment until those are taken down. he does not take this down until he has filed cloture the same day and shuts out all other amendments and goes to the final vote. reid done this more than anyone else, and we have all read the information. i find this incredibly persuasive when is used in tandem with the same-state role, because he will say why fill the

tree because i want to block these amendments or they are partisan place, symbolic, designed to score political points, and this is not real deliberation. that is what he says about real filibusters. when you take the same-state motions and filled the tree, you have done to be a things -- you have truncated debate and you have excluded the minority possibility to participate. in the 110th congress, 56% of all the bills that had a same- day motion that tree was filled, and in the 111th, 98% of all those bills that tree was filled. 98%. in the 112th, we're still going, but is likely to even exceed that. lastly, i would like to say there are new developments in the agenda control that the majority leader is now using in addition to same-day cloture. one is speaking minority

amendments to the exclusion of others for the making up a public argument that the minority has not had a chance to offer the amendments, not once they wanted, but once they just filed, and so they are complaining about voting against cloture. have seen that a number of times. lastly, it is the thing i like to call the blocker motion. in the senate the only power the majority leader is the power of recognition. that allows him to offer amendments. he also by tradition makes motions to proceed. the senators have a vested ensure -- interest in insuring it goes very orderly. as he has truncated the ability for anybody to participate, what you have seen happen is more senators saying i will not defer to you anymore, because we are so frustrated we may also want to move to proceed to our own bills. what you have seen now is the

majority leader which is all these tools where he will file cloture in day is brought to the floor, he will block out all other amendments come and then he will do a blocker motion to proceed to but to another bill while the clock is running on the motion to prevent any other member to move to proceed to a bill he does not agree with. then after two days, the cloture vote will come up, and then we will go on about our business. he has done everything he can to control the agenda in the senate in much the same way that a majority party seeks to control the agenda in the house. this is a significant development and helps us to keep this in mind. it is not a sincerely a given that cloture motion are the same as a minority filibuster that needs to be curtailed.

[applause] >> thank you, mike. i am delighted to be here. i promised night to speak for 6 1/2 hours.x or si the clear out the underbrush that allow people hold about filibusters. first, is filibuster's, unlimited debate, supermajorities to end debate are not in the constitution. they were not envisioned by the framers. the initial senates at something the house had which is critical to move into action which is a motion on the previous question, a way in which you have a simple majority to stop debate and move to a vote. in 18 05, the president of the senate, aaron burr, went for his

farewell to the senate and said you got a rule book, it is -- it has already become encrusted with a bunch of things, duplicative, and many of them you did not even use. why don't you clean up the world book and here are some ideas. they basically said, ok, and adopted the set of rules that took out the motion on the previous question. it was not clear in the senate for a while what that meant, that it basically meant that if one senator took the floor and kept talking or a group of senators did that that you could block action and block it indefinitely. there was no way to stop it until 1917 when we had a crisis over the farming prior to the entry into the first world war, which is the first time we had a rule that created a process where you could and that they pick it has been amended and number of times since then, but a lot of people think it is untried in the constitution, and

is not, nor was the super majority pick that out of the way, let me just add a couple appeared observations. the rule has been changed a number of times, most severely the last time was in 1975. when it was changed then, you had shot a shockwave go to the political arena because vice- president rockefeller with nobody else realizing he was about to do this at the end beginning of the new congress announced that the senate was not a continuing body, and the senate said timeout, went back, contemplated what would happen if the rockefeller ruling stood and it would change the senate, and decided with robert byrd leading the way to come up with a bipartisan agreement that would not allow that to happen, that changed the filibuster, and the fundamental change was moving at that point from a requirement to end debate to invoke cloture 2/3 of those

present voting down to 3/5 of the senate. i will argue that that changed would seem to lower the flood and chris thresher, altered the senate in a fundamental way and the whole idea if it is an issue of significance where the majority leader decides to bring the place to halt and go round the clock, basically went away. there was no incentive for the minority that did not want to take to the floor to dramatize an issue to come to the floor when it was now the burden on the maturity to provide 60 votes. the rule has been in place since 1975. that leads us to another conclusion, which is if there are problems with the filibuster, and issues now which there are, it is not because of the rule, it is the fact that from 1975 until 2007, while there were brief periods of

problems of flareups of frustration everybody has the frustration of a maturity being able to use the tool, and the minority is not always -- in fact rarely has simply been a party acting together. sometimes it has been an individual member of your own party. the democrats had the frustration with a member from south dakota, howard metzenbaum of ohio, democrats and republicans had it with james allen of alabama, jesse helms, and have been a number of others. sometimes it has been factional. it has not been a party-based process. there were periods when there was great frustration, but mostly the senate worked because it is a body of individuals where the party leaders have tried to work things out, sometimes to isolate those individuals, because the senate is a place where it operates and

has to under a broader set of rules than the filibuster by consensus, because almost everything requires unanimous consent. things changed, and it was a cultural change, really. a cultural change that had been building before that time, a change that had frustrated the hell out a profit -- bill frist, and one that has affected every majority leader before and since. it has changed dramatically since. the change is of the two parts. the first is that for the first time that i can see effort you have a party acting in unison using the filibuster on a regular basis as a tool. if you look at prominent examples of the use of the filibuster in the past -- remember, for most of the history in which existed and in which we have had super majority or cloture rules to end the day,

it was used very rarely, and it was used on issues of great national significance, where a minority felt very intensely about it, where will put everything on the line to make it happen. in the civil rights era, when we had those celebrated filibusters, they were not partisan in the sense. they were factional. the fact is the filibuster's done by southern democratic senators to oppose civil rights or voting rights in a deflation were opposed by republicans, just as they were by non- southern democrats. the fact is that civil rights and legislation and overcoming this filibuster's and being enacted which at least as much to the credit and responsibility of everett dirksen, the minority leader, as to lyndon johnson. what we have seen is a regular use of the filibuster now as a

partisan tool, and not just a group of members of the party, but the entire party has fashioned by the minority leader. the second is the use of the filibuster routinely, not on issues of great national significance, and not simply on those issues where the majority leader kills the amendment tree, but on issues and nominations which ultimately pass unanimously or near it unanimously. keep in mind on nominations, where holds which are notices that you can deny unanimous consent, you do not have amendments to nominations. you do not have a process where you would basically have a protest in order. they have been used simply and frequently as weapons of mass

obstruction. why, and how do we know this is the case? among other things, are interesting reports done by a journalist wrote a terrific book, following up on something that joe biden said after he became vice president, and he said right after word he went to the senate to talk to his republican colleagues he had known for the force of 36 years he had been there, and he said seven of them said we are not going to be cooperating, we have orders, we're on to block everything you do. grunwald try to talk to some of the centers, and he found some of them andon and some of them off the record, and he said mitch said it we will throw as much st. in the works as we can pick the process of filibustering, which requires

the two base for the cloture motion to reckon, a lot of time on the floor as you go to this process, and then if you achieve cloture, allowing 30 hours of post-closure debate and can demand the full 30 hours and did not happen -- have to debate, becomes a testing tool to use to soak up an enormous amount of work time, because if you have an ambitious agenda, as majority, floor time becomes a very precious commodity. it is that process, and you can point to examples of bills and nominations that ultimately passed anonymously -- unanimously that were taken through. then another filibuster on the bill itself, and then we often see filibusters on conference reports if and when they come back.

all designed to simply use up more for time. that is the frustration of the majority. now we can get to the frustration of the minority, and the fact is we have something that is a part of a chicken and egg problem. we saw it with trent lott, of bill frist, harry reid, the majority leaders want to move harry -- things along and did not want amendments that are politically embarrassing. there's a temptation to kill the amendment tree and there are many instances in which harry reid has done that, and there was a it's a bit complete on the part of minorities and on the part of the republican minority on that front as well. what do you do about this? in an ideal world, and i would like to see something closer to an ideal world, you do not go back to the process either that nelson rockefeller proposed that vice-president walter mondale had suggested, that has actually come out from time to

time, which is to say the senate is not a continuing body, where just going to change the rules by majority. you do not use the option at any time during the session which majority leader crist had proposed, what was then called the nuclear option, of using the rules and provide the -- presiding officer by a majority in midstream after you have already ratified the rules to make a change. you may use that option at the beginning as a shock value to bring people together, but ideally you get an agreement that would satisfy some of the grievances of both the minority and majority. now we have one proposal on the table by a democratic senator carl levin, one of the most respected senior members, which is basically we will provide opportunities for timely and relevant amendments and a process for getting those and it can be lots of them on the table

and in return we will cut off filibusters on the motion to proceed and clean up the process a little bit more. if i had my druthers, i would say a few steps further. i think some of the options for using the filibuster as a tool of destruction, including the 30 hours debate, i see no reason why you cannot at minimum say 30 hours, divided between the majority and minority, and you have to be on the floor debating if you are going to take the 15 hours that you have. i see no reason why you cannot expedite action even further, so if you want to raise the bar to 60, you can do it, but you have to move further. then i would do one of two things, because i think what has happened here in particular and what has made this the tool that becomes particularly attractive to use on a more regular basis

is that since 1975, basically the way the process has worked as put the onus on the majority to move to action, instead of what was the whole idea of the filibuster as a developed over time, which is a minority, whether a partisan, ideological, regional, or other kind of minority that feels so intensely about an issue that is willing to sacrifice enormously to make its point of view known and to block as long as it can. that is appropriate. but you can do it in one of tea to be zero ways. the simplest is to return to a standard, in this case 3/5 of those present voting, and if you decide on an issue of pre tickets that you will go around the clock, it will be up to the majority to make sure they got their members waiting close by because if they are not, if that

the 3:00 in the morning decided they will let the majority keep 50 of its members there because you can have -- you can note the absence of a quorum, and they have to keep the debate going, and the minority needs only one or two people of around to prevent any agreement, they have got to show up, because otherwise there are only six senators there and you can invoke cloture with 40. or my preference, because it deals with a large number of frivolous amendments, is to switch the burden from 60 senators in the majority to 41 in the minority. you want to keep debate going, you better produce 41 votes on a regular basis. that would end what i feel as a farce as we saw a couple of times a couple of years ago, which was the democrats being forced to drag 92-year-old harry byrd out of his hospital bed to provide that 60 of the spirit the burden should not be on the

majority. there are ways of doing these things that ought to meet with the broader approval. it is not and the ability of the minority of what ever sort to raise that bar, but it puts the burden where it belongs and gives the minority back something which it deserves, even if they happen to be embarrassing to amendments, the right offer amendments. i will make one final point. i would like to see further changes when it comes to executive nominations. the biggest dispute we had in the past was over filibustering judicial nominations. frankly, i do not have a problem abbas drink judicial nominations because they are lifetime appointments, and you're not just talking about the preference of the president, but something about that will be there for 20 or 40 years after a president leaves office. these ought to have the highest level of scrutiny and ought to be used rarely, but executive nominations are different. there ought to be a, if not a

bias, something in favor of a president in favor of having his or her nominees in place in the executive branch. so this is one instance where i could see a process of producing the level required for culture gradually down to a majority, allow time for debate, for consideration, but let a president at his or her people in place. thank you. [applause] >> does it matter what happens to a few senate parliamentary procedures? it doesn't have anything to do with the health of our nation or the future of our nation? if you do not think so, you're not sitting here in the audience or watching online. the founders of our nation thought it mattered. they labored many months during

the constitutional convention to get it right and spent many hundreds of pages in the federalist papers arguing for the constitution. it is true what dr. orne's dean says that the filibuster was not part of the constitution or of the original senate, not until 18 06 was a filibuster even possible. the spirit of the filibuster was resident in the founders' conception of what the senate should be. and by leading to the right of the minority is not just a question of whose partisan ox is getting gored, but it goes to the heart of preserving minority rights and insuring the liberation is permitted to improve lawmaking. senate majority leader harry reid is poised to engage in a power grab for his party and will have consequences beyond the 113th congress. if he is successful, sometimes he will help democrats trade

sometimes he will help republicans. it will rarely help the american people, and will serve to reduce the quality of new laws being made and further exacerbate the toxic political environment by reducing>> we are not a democra. we are a republic. the senate was intended to be a check on the house so as to preserve minority rights and that will might prevail. more deliberation produces a better legislation. we are a republican, not a democracy. the founders did not form a democracy but a republic. few americans know this. if you are as apt as i am to say we are a republic, people say -- you are making a point.

they have lost an understanding of the difference between the two. democracy never appears in the constitution. i remember asking in my high school civics class -- what was wrong with john jo the french resolution -- revolution? the teacher was at a loss to explain the difference. he did not know. our republic is not founded on the notion -- the voice of the people is the voice of god. plus one, that% olus on is the notion. the founders put in those less- democratic elements of the constitution and our new government so justice could be

better achieved. it was not that they could not see beyond their own cultural binder's -- blinders. they believed that the simple majority rule in every case does not always produce the best results. the founders had a very tough words for democracy. james madison said -- democracies have ever been specters of turbulence in contention. the number's of a democracy is to licentiousness. governor morris said democracy is average and wild. rush said a simple democracy is one of the greatest of evils. the point is that the undemocratic elements of the constitution are there on purpose. among these are the veto, the bicameral

legislature, and others. loss of minority rights. the senate is one of the less democratic elements of the government. its purpose is to check the majoritarian and hopes of the majoritarian house and preserve minority rights. i was a creature of the house before i was a creature of the senate. i hated the senate for my 15 years in there. it was a graveyard for all of the legislation that we wanted to push through. i went on to the senate. i sat at the feet of marty gold and came to appreciate the importance of the senate. i went to the white house. i am t trilingual.

there is a story that captures the truth about the senate. when jefferson, who had been the epicenter of france, sat with washington for breakfast. -- the ambassador of france sat with washington for breakfast. washington said -- didn't you now to spark that coffee into for the coffee into a cup? we pour our legislation into the senatorial saucer to cool it. the house is made for speed. a shorter term, closer connection to the electorate. the senate was made to be a break. it was made as they speak from -- speed bump in as a dead end. the seas of the filibuster were planted in the constitution, but

when theouted in 18 06 senate change its rules. the first filibuster did not occur until 1837. cloture was not established until 1917, which was the two- thirds of those voting. 1975 -- quarter was reduced to the current 60 votes. -- cloture was reduced to the correct 60 votes. it hung above the chamber. it forced conciliation and compromise to move legislation. filibusters were rare until recent years they forged a kind of different kind of body.

marty gold talks about the house being a place where the offense is in the primacy. in the senate, the senate is in the primacy. house minorities get crushed. this minority's strength has a salutary effect in the senate in that it tempers the political passions that are moving through the house. the more enduring will is marked likely to triumph. -- is more likely to triumph. it makes it less efficient. that is not the main aim of the framers -- inefficient government. to the extent that the senate becomes a mirror image of the house, which we are seeing with the one man rules committee named harry reid, it will have the benefits of a bicameral legislature, but it will be

tempered. the liberation is the proposed to undermine deliberation that is intended to -- the issue is not whether reid will continue his efforts and prevent the minority from offering amendments to improve legislation. senator reid told senator mccain that the days of amendments are over. instead of being able to offer amendments, you could always vote against the bill. that is how it is in the house of representatives often. that is now -- that is not the way it is supposed to be in the senate. the minority would not have the right to approve legislation through the amendment process. they would be given a by mary choice. yay or nay.

senator reid has blocked senators from offering amendments 68 times. that is 70 times greatest than the number of times the six prior majority leaders blocked the offerings of amendments. i remember when i worked for bill frist and the republican senator would ask for the amendment tree to be built. i remember the reaction in our office. we said -- no, that creates an implosion -- explosion in the senate. we did it 15 times. when senators cannot offer amendments, their constituents are disempowered. deliberation promotes justice. that is what the framers believed. alexander hamilton said this -- in the legislature, promptitude of decision more evil than a

benefit. the differences of opinions though they may sometimes obstruct salutary plans yet often promote deliberation and circumspection and serve to check excesses in the majority. this was a constant and enduring fear of the framers. ball the filibuster was not in the original senate and was not in the constitution, the seat of it were. it was important to the framers that the senate half as that check. there is a perfect -- is there a perfect number for cloture? no. the drift is bad for deliberation. i want to close with these words from christopher dodd, who in his spare roh speech on the senate floor in 2006 said

-- the nation founded in revolution which sought to crush dissent, there should be one institution that should always provide a space where dissent was valued and respected. our founders were concerned not only with what was legislative with how we legislated. thank you. [applause] >> i am the senior fellow for governor studies at the heritage foundation. the current push to reform the filibuster is a partisan power grab by senate majority leader harry reid with the support of president barack obama. he wants to in the procedure that allows members to filibuster the motion to proceed and force a talking filibuster.

he wants to do so by breaking the rules to change the rules. he would use a nuclear option, which we have been discussing, which is when the majority leader forces a change of the rose with a majority vote. putting the substance of the changes aside, the senate banking rose have never been changed while following the rules and regulations -- without following the regular order. there have been changes to precedent in the interpretation. the rules have never ever been changed without using the regular order. in 1979 -- robert c. byrd did use a version of the nuclear option to change the debate when debating the executive nominations. that was a change in precedent.

it has never happened that the senate has changed the rules by breaking the rules. -- the i, shown section v senate rules continue from one convert to another. you need a two-thirds majority to change the rules of the senate to shut down debate on changing the rules before you have a simple majority vote. rule five exist because the senate is a continual body with most of its members carrying over from the previous congress. when the senate convenes in the next congress, one-third of the senators are sworn in, what the other two-thirds will maintain their membership. you'll not see senate majority leader harry reid or senate majority leader mitch mcconnell. they remain members because they have been previously elected and

they continue their membership. you will see one-third of the senate will be sworn in under the existing senate rules. the senate will use the senate rules to swear in all the new members. that undercuts the fiction that harry reid is trying to remote -- promote that somehow the rules are suspended or are not being implemented when you start up the first day. we hear the argument that the first day there are no roles. all of the new senators get sworn in under rule 3. looking back during the fight in 2005, senator reid denounced breaking the rules to change roles. on april 26, 2005, reed said -- i would never ever consider breaking the rules to change the rules.

this is what senate majority of peter reid is trying to do today. we made the case against the nuclear option when he argued for people to suggest that you can read the rules to change the rules is un-american. the only way to change the role is to a rule that says to change a role in the senate's prose requires 67 votes. you cannot do it with 60 or with 51. i agree with senator reid in thousand 5 that the promise of the senate majority leader harry reid's actions are against the will of the american people and the intent of our founders. on april 13, 2005, senator barack obama argued that removing the filibuster would cause more partisanship. he said -- the american people want less partisanship but

everyone in this chamber knows that if the majority ends the filibuster that they choose to change the rules and and democratic debate. the fighting, bitterness, and gridlock will get worse. senator chuck schumer of new york argued on may 10, 2005 -- the basic made up of our senate is at stake. the checks and balances that americans prize are at stake. the idea of bipartisanship we have to come together. you cannot as a lamb everything through because to have a narrow majority is at stake. the things we love about this grand republic are at stake. senator dick durbin argued -- those who would attack and destroy the institution of the filibuster are attacking the force with in the senate that creates compromise and bipartisanship. there was an event in 2005, at

the center for american progress with a keynote speech by the late senator robert c. byrd of west virginia. he cited the history of the filibuster that preceded our republic. he said -- in my 53 years of congress i have never seen a matter that came before the senate or the house that is so dangerous, so out of the mainstream, so radical as this. obstructive tactics are of ancient origin. while caesar was on a soldier in spain, the objection of consuls was approaching. he applied the senate for permission to stand a candidate. cato opposes his request and attempted to prevent his success by gaining time, which he spun

out the debate until it was too late to conclude upon anything that day. the filibuster has been down -- around 2064 adulover 2000 years. the late robert c. byrd would say otherwise. another speaker, norman ornstein, from 2005 said something about republican's attempts that i agree with. this is a radical step that has been taken. it will require breaking the rules, steamrolling the parliamentarian. i have been disappointed in the reporting on this issue, which uses a short hand over matters, making it appear as if this is something that can be done by the majority.

they have not elected to do it before. if you challenge a rule on constitutional grounds, that challenge is debatable. the debate can be a filibuster. what they will have to do in ignore their parliamentarians or steam roll over the parliamentarian and for their roles by not allowing debate. norman ornstein argued -- the essential character of the senate in the system trying to avoid the emulsions of the majority is to provide an outlet for minorities of one sort or another. you do move to the potential of terre known trajectory of the majority. there will be a congressional leader who wants to achieve a goal.

that temptation overrode president. -- president. what reid is trying to do is run. -- wrong. barry,es will push the bar he has provided opportunity for conservatives to push wilson room -- rules for reform changes. if there are no rules, that may improve the senate. a new 2/3 point of order against any infringement on the second amendment rights of all americans. this would be subject to a simple majority vote and create a super majority. if you look at the voting history of the senate, there is a pro-gun majority in the senate. this is subject to a simple

majority vote and would have a chance of passing. another thing that is important is getting rid of senate majority leader harry reid and the power to block amendments. reid has used this tactic 68 times, more than his predecessors combined. it is something that would allow all members of the senate to participate in this process, offer amendments. if he were to pass it, it would be great to pass the 67 votes. you may not -- the whole problem may go away if republicans are allowed to participate. we are seeing a constriction of by tryingity's rights to get rid of the motions to proceed the bills by forcing the

talking filibuster and after a debate is to construct post cloture debate time and if you tried to curtail merchanmotionso to conference. thank you. [applause] >> thank you, everybody. i thought i would ask questions. can you illustrate how -- what happens when a leader goes to the floor and ask for recognition? what kind of amendments are we talking about? >> the only basis of power for the majority leader in the senate is the primary basis of power. he goes to the floor. he asked to be recognized.

he is recognized. he offers an amendment. say only three amendments can be pending. he will offer a performer. it does not mean anything. -- is pro forma. it does not mean anything. so on until you fill up the number of amendments that can be offered. he will file cloture on the bill. the clause culture has a timetable, he needs those commitments in place to block on amendments wall that time to run out. it is a powerful tool when used with the same day cloture motion to control the agenda. >> the filibuster that follows that tends to be an effort to

undo two amendments that are non sensitive in nature that preclude having a debate and having what we may think of as a legislative process among the tactics that majorities used to respond to obstruction can proceed minority obstruction. we see this in the house all the time of closed rules. that is what we are seeing happen in the senate. when you see votes against cloture, they are voting against that. is draconian. role it gives them no rights. when you vote against cloture in the senate, you can sayd

it is much the same kind of behavior we see in house minorities. >> with anyone else but to common? >> killing the tree the number is about 68. reid has done its whether any of his predecessors combined there has been instances where senator reid has said i will fill the tree. republicans filibustered a motion to proceed to a bill. it was the promise that hung up the process. >> i am glad that brian used all of these eloquent quotations,- side. i am surprised he did not use the quotation from mitch mcconnell, from bill frist, from orrin hatch and others.

there is marty gold's memo on the subject, which is to say that hypocrisy goes all around on this issue depending on what you are in the majority or minority. i do not want people to be left with the impression that this is because harry reid is a predator and none of this would have happened if he had not just out of the bloom used this process of using the amendment trade. no amendments on nominations. unprecedented numbers of holes and filibusters on nominations, including judicial and executive branches. filibusters on bills where amendments were allowed and passed unanimously. a point about deliberation -- bill, your principles are ones

that i resonate to. when you have a filibuster used where you do not have to debate anything. with yourhave to l finger and say -- i will filibuster this. when you have i was of post cloture debate where no one debates, that does not enhance the liberation. if you want deliberation, the talking filibuster would be good. you would good people on the floor -- you would get people on the floor debating. i'd like to see the other changes in the senate rules. i continue to believe everything that i said. also about the dangers of making these changes in this fashion. there is a distinction between making a change at the beginning of a congress where you debate the question of if the senate is

a continuing body and in the middle of a session where you have agreed on the rules. one of the things that troubles me about the notion of a continuing body is where rose cannot be changed except by a supermajority, i imagine the democrats had the same number of votes as they had in the 1960's. i imagine if we go back to the new deal and they passed a rule that says you cannot cut spending in any program without 75 votes and you cannot change the rules without 90 votes. that is under the same characterization. would anyone like to see that happen? i think not. there are issues raised about whether you can have a role that majority sets for a supermajority that can set the bar so high you can not change it again. that has not happened. maybe it would not happen.

on that front, i do not want to see this happen. i would much rather see a bipartisan agreement that includes more opportunities to offer amendments, even embarrassing ones, to eliminate filibusters' the put the owners on the majority. >> it is not fiction to say that in the senate rules is as the senate is a continuing body. members carry over from one congress to another. you swear in the new members under senate rules 3. ried will make believe there are no roles. that the sun makes sense to me. we -- that does not make sense to me. this gives harry leverage to cut a deal. that would be the best way to resolve this matter. to pull the trigger on the

nuclear option and make believe there are no rules is not intellectually honest. >> i stayed until the q &a the response that will come up on the frist nuclear option. we call it the constitutional option but not because we contended it was in the constitution that it allows the senate to set its own rules. what would have been done with have been setting precedent by tabling a ruling of the chair. that was not new. i could never get "the washington post" to print this, but robert byrd exercise to the nuclear option four times as majority leader. it goes back to the beginning of the senate where you send binding -- set binding precedent in the senate by a simple

majority will. it was being used. it should be used on rare occasion for extenuating circumstances. prior to 2003, there had never been a judge denied confirmation due to a filibuster. not one that have majority support. never. beginning with the estrada filibuster and there were five judges that have majority support who were all denied confirmation due to a filibuster. prior to that, it had never happened. we were trying to restore the way it had been. that had not been the standard prior to 2003. the biggest vulnerability any majority leader has this time.

i came over to the senate. we were moving to cloture on a bill after eight days spent debating in energy legislation. i remember a senator sighting -- what is the rush? >> i remember cracking up. as a house got, eight hours is a long time. time is the enemy. that leverage of the exchanges to the legislation. obstructionists' can say -- look, let me have this amendment. let us make this change. how can the senate get out on thursday and friday? whenever we had a recess, we had a poor area of activity -- a flurry of activity. >> we will go to our audience. please identify yourself. the same surprise

at the number of filibusters of have gone on in the last four years? do you not relate it back to the unwillingness of this executive to reach out to the minority party? >> you could take it back to the last two years of the bush administration when the number shot up dramatically. it is not simply a barack obama phenomenon. what we see both from my own work inside the senate an observation from what we see with books is that it is a deliberate strategies hatched at least at the end are grow if not

before to raise the bar and what things are happening and to get unanimous minority support and to do its not just on bills were you wanted to have amendments allowed but on bills were you one not interested to have all amendments allowed to make it messy. i will not defend obama's out wrenching the minority party. i could go back to other methods of obstruction with bill clinton, who reached out all the time. that is a minor factor. of killing thee omendment tree been done to much. that resulted in some protest. it had much more to do with a

concerted party strategy, which is the first time we have seen it. >> there are two separate issues -- of shrubs and on nomination and obstruction on the legislative side. you'll see these judge bowed to 99-1. remember what we are talking about. the alternative is to move it by unanimous consent. this is not like the house where there is a vote and a member of they say -- i will have a roll call vote. the majority leader can schedule a roll-call vote or not. many times he does not. one individual is filibustering the judge. and we get a vote on that, 99-

one, 98-2. no one was suggests that those individuals should be required to vote yes for that judge, is what unanimous consent is. that is not what the house does. heavy had majorities in force votes. what it comes to cloture -- this idea of holding the floor. a post cloture has to do that. oftentimes we choose not to because the majority and minority agreed to let that time run out. the majority could keep this in overnight. we could have a vote. on the senate floor, they were doing that. they were passing amendments. they were moving things.

the bill manager would ask if there was further debate. if there was no one around, there would be a vote. it would pass. that is the prerogative to have. if you choose not to do things that way, it is because you are trying to control the agenda. look at the same day cloture motions, you are trying to control the agenda and block things are happening on the floor. that is what you are saying. the reason we have not had a budget in the senate for three years is because you cannot block amendments on the budget process. that is why we have not had a budget in three years. we have not done an appropriations bill and i do not know how long you cannot offer amendments.

>> you said harry reid may be doing this as a tactic to go back and negotiate a deal. he said he does not like the the result of his agreement. what kind of different hand shake agreement would he be looking for? what would be an acceptable deal at the beginning of the 113th? >> this has happened in the past where leaders have said they will use a nuclear option to change roles and an agreement was negotiated. they have litigated this in the

senate and have had precedents where the senate rejected the idea that the senate is not a continuing body. it is best that they work out an agreement. you are using the regular order. you allow the opportunity for senators to extend debate on rules change. if there is a vote that is 68-to what ever, that is the best way to resolve it. as for changes to the rules, i have not heard the senate majority leader or anyone put out a specific proposal saying -- we are ready to give up our right to fill the tree if you get rid of the motions to proceed the bills or implement the talking filibuster. it is a one-way street where senator udall and harkin of iowa have ideas on one side.

they do not have balanced to them. they do not provide enough rights for the minority power to make it plausible. >> look at the proposal that a few monthsut out at th ago. that had been discussed in a bipartisan way in the senate rules committee to several hearings on the filibuster. chuck schumer, lamar alexander, and others talk about the idea of a trade-off, of limiting filibusters' on the motion to proceed in return for some karen t of amendment. senator levin's proposal is specific in how that can work. you could use that as a starting point and agree to some other changes.

cobwebby like what happened in 1975. the agreement was that they put in rule 5 for the first time. it had never been there. we came this close but we will not do it. we will put the in the rules. you could unimagined on a bipartisan agreement. you could get a handshake or implicit agreement between reed and mcconnell that there will be a change in the way they do things now and more willingness to offer amendments and in return few were frivolous filibusters'. it may include something -- we saw last year a commendable step in a bipartisan faction in the senate to streamline -- fashion in the senate. the use of the whole, which is done by zero senators, and done

not because of objections but as a hostage-taking mechanism. it has increased enormously. finding a better way of a round streamlining executives may be part of the agreement. it may not happen. there are seeds of a deal that could work for both sides. >> i have been a promiscuous moderator. we can except one last question. i have as the panelists to keep their questions brief. ?re we doing ok to atta please, join me in a warm round of applause for all of our panelists. >> the majority leader harry reid said he would seek changes to the filibuster rules. we will hear about the historical use of the procedure and how they could change the senate in the future. from "washington journal," this

is half an hour. >> joining us now is norman ornstein. >> this has been an issue for more than 100 years. in the last few years, there has been tension between the parties over the way the filibuster has been used. used.

ago which is very rarely for the majority now for six years have gotten increasingly frustrated over this, frustrated when they have all the reigns of power, the house frustrated even when the house was in the hands of the republicans and there's been pressure building to do something to redo the rule. in 1975 we did it and we have clearly reached a flash point now. host: could you explain exactly what is it and how does it work? >> just to give you a caps assume history, pedro, there was no filibuster at the beginning of the republic. what happened is, in 1805, the predeciding officer of the senate, the vice president said as he was leaving office said, your rule book which includes as it turns out something that enabled you to stop the debate and move to a vote on the previous question, he said you've ought to clean up the rule book and inadvertently took the rule out and then you had no way to stop debate. but any senate can deny unanimous consent which means that's how it operates to move forward then takes to stop the debate from moving forward and

that the point 3/5 of the senators or 60 votes if they have the full 100. but you could use it to stop or continue to debate and block action on the motion to proceed to a bill. then if you agree to proceed to a bill, you move forward on the debate for the bill itself and filibuster that, requiring a bar of 60 votes, if you finally work a compromise with the house and off conference report coming back, you can filibuster that. each one takes many, many days to overcome. you can't just say ok, we've got 50 votes. let's move forward. you've got file are motion for what is called cloture your. it has to ripen for two days. then you can have a significant amount of debate before you get

to a vote. after you've voted for slow chure, so you're going to stop debate. now there's 30 hours of post cloture your debate. so if you want to use the filibuster, you can stop everything for six or seven days and democrats believe republicans have done this repeatedly to use a phrase the normer senator bob bennett said was mitch mcconnell's idea was to throw sand in the works. and that's what's bringing us to this point of changing things. host: here's your chance to learn about the procedure and change with our guest. if you want to call, (202)585- 3880 for democrats.

(202)585-3881 for republicans. (202) 628-0205 for independents. twitter.com/cspanwj is our tweet. and you can email us at journal@c-span.org. so what is senator reid proposing? >> before i get to that, pedro, let me just make one point. this issue is a little bit like your debt ceiling one. your perception depends on where you sit. so it was before republicans in the majority with their own president frustrated and talking about how they were going to change the filibuster to enable it to act. now it's flipped around. it's your president and they are saying let's be responsible. so we have had this tension develop, but it's younger senators who push this now and harry reid who resisted for a long time, because he knew he would be back in the minority, he has embraced them now out of his own frustration. so they no longer want a filibuster to stop a motion.

and the other is the so-called talking filibuster. now you can lift your little finger as one senator and say i'm going to filibuster, and you've still got to go through all of these motions. you don't even have to appear in the senate at all until there are votes. so they say let's go to the mr. smith goes washington days, if you're going to filibuster, you've got to be on the floor talking. as soon as nobody's ready to talk, it goes to a vote. and if it goes around the clock the minority will have to be on the floor and show some dramatization. host: get in the game so to speak if they really want something done? guest: yes. and the last time the filibuster rule was changed was 1975, 2/3

of those present and voting. they moved it to 3/5 of the entire senate. if you think of going around the clock, if you're in the minority, you've got to be around. let's say that you decide to go home and sleep and the majority has 51 senators there to make a quorum and they say we're going to hold a cloture your vote, if it's 2/3 there present and voting, they only need about 35 senators but if it's 3/5 of the senate, the majority has to have that many people around there. so now they want to urn it around to where the pain is on the minority not the majority. host: steve, you are up on the democrats line. caller: thank you for taking my call. i absolutely agree with norman ornstein. i think that the filibuster's been massively abused since at least 2000.

and it's childish on city nance, this do anything to stop mr. blacky black man is old, and i think the american people are tired of it. guest: let me note one thing that one of the hesitations that some democrats have now is the house is in the hands of the republicans, so if your goal here so get legislation through, they are not going to eliminate the filibuster, they are just going to put the pressure on the republicans. this may help you get bills through the senate but it isn't going to homestretch you in the house. and if they do it by the way they wanted called the nuclear option instead of doing it normal practice, that can be filibustered and requires 2/3 of those present voting.

if you do it that way, the republicans have indicated that will go to defcon one and block all action in the senate and that it's unprecedented and won't happen. so you've got to be careful about what the cost and benefits are. that's part of the debate going on, but as the caller said, there's a lot of frustration throughout because of the belief that this is a misuse. guest: democrats added two seats, which was pretty stunning but added members that are feisty, those like elizabeth warren who have made filibustering a big issue because elizabeth warren was really blocked from being able to take over position at the head of the consumer financial bureau because of holds and filibusters. holds is basically a formal notification by an individual senator that he or she will deny unanimous con seant filibuster which is usually a death blow to a nominee unless it's lifted.

caller: pedro, i hope you give me a few minutes like you've given a lot of other people. norman ornstein, instead of filibusters, they should have to stand on the floor and make their point and argue their point. but the president ran a class warfare. i think the republicans should give him class warfare right back. host: if you have another question about what we're talking about, but we're going to have to move on. caller: independent line on every state on welfare. host: jack on our independent line. caller: i thought we were still on the white house budget proposal, but we're talking about filibuster rules. in my opinion i think the filibuster itself, not only has it been abused.

but i think it's an internal power struggle and made up by all those guys and women. to me, it seems like it's a power struggle. if the democrats feel like they have power in the senate but not the house, they want to change the rules and if it were the other way around, republicans would do the same. the american public should really recognize the political framework around this and why they are actually doing that. but my comment about the budge set social security, medicaid. host: i'm sorry to, i want to keep it to this topic. to the minority parties, point, if i understand it correctly. the difference between this process, could you explain that? guest: you could view it as a chicken and egg prospect but the majority leader has a lot of power in the senate to fame debate. so what a majority leader can do is a process known as filling the amendment treatment basically through his power of

recognition, he can put in a number of amendments to every degree and block any other amendments from moving forward. majority leaders from both parties have used this to varying degrees and used it more and more and frankly used because you want to get away from too many filibusters, but also because leader doesn't want amendments that could be damaging to his members, so the republicans have a legitimate right here that they want to have vehicles to protest when they are not allowed amendments. one of the proposals that has been out and formalized by one of the most senior and respected members of the senate is basically a tradeoff. we will end filibusters on the motion to proceed and give you a guarantee of timely and relevant amendments. and this is also something

that's been discussed frequently in the hearings and the rules committee in the senate. i've testified a number of times, by chairman chuck schumer and ranking member. there are seeds for a compromise here that could work. the last time the filibuster rule was changed in 1995, it started with a shock wave. shpt rockefeller -- nobody knew it was coming. the senate is not a continuing body despite 2/3 of its members are there at any time, and they said, time-out, and moved this bipartner compromise. you could see that happening again where there's this threat of doing it by a unilateral motion and that brings mcconnell and alexander and others to the table, and reid and his colleagues agree that they will

be much more open with amendments in return for a change that would ration down the affirmative louse use of the filibuster. host: if the democrats wanted to do this, what's the timeframe? guest: the way it would usually work is you do it right the first day, january3, as the house sets its new rules on that first day. but the original proposal for what's called the nuclear option, which republicans had thrown on the table some years ago over judicial nominations said that we'll do it at any time. not get too technical, but it's basically somebody said to the predeciding officer, we want to know what the parliamentary ruling is on whether you can end debate, in this case, with a simple majority.

the parliamentarian would advise them that that's what the rules say is and no, you need a filibuster and appeal the ruling of the chair, and that can be done by majority. so there's a slippery way around it that you can do it at any time. harry reid will say to mitch mcconnell. we'll check that out. i'll give you some amendments. if it isn't working at any time, we'll change it unilaterally. host: and this is sort of nung cheek, with the ousting of the filibuster rule, why do you need elections? >> well, it's not all clear that's what the framers had in mind or that it fits even a model of a parliamentary government where if you have all reigns of power, at least you can act. it's not the way things have worked in the past. and the other part of this is it's a kul problem as much as anything.

the filibuster used to be a way to fix things. if you need 60, the minority has to reach out to the majority to reach some sort of conference mize. now it's being used as a weapon that drives some apart. so for those of us who want it to work in the ways the framers had in mind, now it takes a rules change. host: the potential change in an op-ed, the those encapsulated -- what you're saying now is? guest: the talking filibuster that they are talking about has its limations. it can be very useful on one of these big bills like the affordable care act, but if

you're using the filibuster on everything, the majority is not going to bring this place to a halt over hiring an assistant secretary for education. so my thoughts that i have had for some years. now it takes 60 senators to stop debate. the onus is on the majority. in the past they had to haul 92- year-old robert burns out of his hospital bed to come to the floor to provide that 60th vote. you want to continue to debate, you have to have 41 voters on the floor every time there's a motion to stop debate. that seems to me as a more effective way. because you could make it apply to all these over filibusters. host: a tweet says what happened to majority rules? the filibuster was to give everybody a say, not to rule the land. >> and a filibuster was a rarely-used phenomenon. up until the 1950's yoo might get one or two a year. now cloture chure motions, the one who stop debates aren't ones you talk about.

host: democrats line, james, go ahead. caller: yes, good morning, c- span. thank you for taking my call. i understand the filibuster rules. i understand the filibuster rules. i'm 63 years old, and i'm a disabled veteran of 10 years, vietnam. but nobody wants to get down to the plain, cut through the chase on the filibuster. mitch mcconnell, god forbid, has stated from day one what his objective is. to stop this man. nobody wants to talk about it, because it's politically incorrect to bring up the race issue, but it is so obvious. and i have european friends

that i speak with in europe, and they say it's so obvious. it is pure racist. host: comment? guest: you know, race is never far from the surface in american life or american politics. the use of the filibuster in this way, though, preceded barack obama's presidency. if you go back to 2007 and 2008 when george w. bush was president, democrats had the majority in the senate, they used filibusters to block bills from that might be an embarrassment to the president. but the caller, whether it's race or not, it's pretty clear that senator mcconnell has used weapons to try and block actions taken by the president that have not been used before in this fashion, and use them in unprecedented numbers.

host: and according to history, civil rights was one of those things the filibuster got used for. >> what's interesting about those is while it wasn't a partisan issue, it was a factual issue. dirksen was a great hero of the civil rights revolution right alongside his partner, lyndon johnson. it was the southern democrats, but at the -- that point in time, it was the southern democrats that wanted to talk and one held a record of talking for 24 hours straight. these are filibusters where they don't want to take the floor and they have no interest in debating. it's all to block things. when you get a filibuster when

you have bills that pass unanimously, it becomes clear that this was not a matter of principle over a particular bill but a tool of obstruction. host: randy in minnesota, republican line, good morning. go ahead. caller: yes. good morning, c-span. this filibuster thing, this is the perfect way for our government to work the way our government was set up to work with checks and balances. with the filibuster rule, -- i'm getting an awful lot of feedback. host: go ahead. caller: i don't want the void it i want to make these guys sit down and do the people's business. president obama wants to fall off the cliff. that's why he wants to go do that to the middle class and blame the republicans. host: caller, we'll leave it there.

caller: be on the republican lines say, let them talk. guest: so it may be that this filibuster idea may have more support. toocrats don't want eliminate the filibuster. they want to keep it in place but just want to change the burden and move it to where there's one bite at the apple on a particular bit. so these changes are not earth shaking. one is your perspective on it, whether you're in the majority or minority. but the way you do it becomes an important part of this. that's why the implications here are fairly clear which -- fairly clear. if we end up seeing this happen by call it the nuclear option or defined as the constitutional option that it's perfectly constitutional to change the rules by a majority.

but that means on issues from the budget to immigration to many of the other priorities we have, a farm bill that's not yet gone through, we could see another twist in this that goes beyond a simple rules change. that makes the next two weeks of maneuvering and negotiating, particularly important ones for all c-span viewers -- host: if i'm speaker john boehner -- ifst: he's basically said the democrats unilaterally change the filibuster rule, the house will unilaterally block any bill that passes as a rule. you wonder if they will continue to hold to that if it's something they really, really want to do. host: our next guest to talk about potential changes. go ahead. caller: good morning, pedro.

thank you, norman ornstein for coming on the show. i like your point of view. i want to ask you, if you can project into the future what the rules of the senate would look like outside of the context of the present crisis. talkingell, we're not about many significant changes, but there is an important thing to keep in mind. the way the senate has operated for a very long time is with a delicate balance which is with unanimous consent, every individual senator has an enormous amount of power, including the ability to block way beyond the filibuster, there's so many ways that you can botch up the system and keep things from moving forward. occasionally they have had these maverick individuals from the left and the right. strom thurman, jesse helms, that will use their individual power to gain leverage over parts of the senate.

occasionally you will have it now as we do with a party operating that way. but the rules of the senate go way beyond the filibuster. and where the republicans now have some leverage in this is if they want to really mess the place up by denying unanimous consent on everything and forcing all kinds of torturous ways around that by saying that the senate, if it's in session, they won't allow committees to meet. by requiring the reading of the journal and amendments at great linux, that those are all things by which if you wanted to move past them, you would have to completely overhaul the senate rules and make it like the house with the trains running on time, and the fear of senators from both spearts, you push this too far and you lose the character of the senate which is a body of individuals

representing states but not quite the same as the house of representatives. and that's where changes in rule 22 as it were, the filibuster rule, matter, but you've still got a lot of other rules that give tremendous power to individuals and the power of the party as it unites together as a minority to block action is still very, very considerable. host: if someone decides to stand up there and just take up time, could they open up a book and read it? guest: they could. with the talking filibuster, you have to talk about something that at least is relevant. but defining really inventories is a tricky business. host: one more call from berkeley california, democrats line. caller: hi there, mr. ornstein, guest: hi. caller: i have to two questions. first off, i want to congratulate you for demonstrating integrity, because

i believe you're representing a highly conservative institution with american enterprise and your views are coming across unbiased. guest: thank you. caller: secondly, i am not scared of the nuclear option. initially based on my limited experience or knowledge about it, and/or the stopping of the senate. i had an think it might be a portal we might have to pass through as a country to get beyond it. but my first question is regarding, is it unprecedented that somebody, the majority leader, would take that option? and what else, in terms of the nuclear option, could it be used for if it became something that was a standard fare. is it unprecedented that

somebody, a majority leader would take that option, and what else in terms of the nuclear option could be used for if it became something that was standard fare? do they have to stand on the floor and talk during a filibuster? i seem to recall that i have seen that happen in my lifetime. guest: we have never used the so-called nuclear option. the senate has come close several times. they'll like the idea that it is a continuing body and a unique body. what we see in the debate and the rules have been reversed since it was mitch mcconnell threatening to do this if you years ago. in future majorities will take much more extreme actions including eliminating the filibuster entirely. we will swing wildly back and forth. the house of representatives has always allowed a majority to

set rules. you do not get wild swings back and forth because everybody knows you better keep some limits or the next guy may do something more intense it is a fear that exists. you could make a tweak in the roll and get frustrated because you want to get your program through and keep changing the rules with the majority. it would be interesting by dangers to see what would happen if they do open up this avenue. ifre's a good chance that they do, we would have a brief period of intense opposition by the minority. but they will not block an immigration bill when it is in their own interests to pass it, or to block action on the fiscal cliff if the markets are going ballistic.

it would settle down after a while. host: what is the likelihood we will see changes? guest: they will not necessarily occur at the beginning of congress. there is a good chance that they will step back and do a compromise that involved both parties. for your time. >> robert van order looks at the mortgage debt release act then bradford fitch discusses orientation sessions for senior aides of member and members alike in congress. after that, the artistic self advocacy network on been an autistic adults.

-- being an autistic adult. "washington journal" live saturday. president obama called on congress to pass an extension of tax cuts for the middle class, while allowing tax rates to increase for people making more than $250,000 a year. later in the day, house speaker john boehner responded to the presidents comments. you can see both of them starting at 8:00 p.m. eastern here on c-span. next, a look at the fiscal health of the federal housing administration. according to a recent audit, the government agency is more than $16 billion in the red because of low interest rates and slow rising home prices. held by the center for american progress, it is an hour. >> welcome to the center for american progress. i am julia gordon, the director of housing finance and policy

here at the center. i am delighted to see some many people here for this important conversation about the federal housing administration. we have got a terrific two part program for you today. first you will hear from acting on keyioner carol takeaways and the steps fha is taking. we will then hear from a panel of experts to put these findings in perspective. our panelists will discuss the roles played in the housing market since the crisis began, where we would be today without fha, and what past mistakes can be avoided in the future. our discussion is particularly timely because as many of you know, two weeks ago fha released a report. we learned that for the first time in its history, the fund is projected to have a negative

economic value. this number does not mean fha is about to be unable to settle insurance claims. according to federal budget rules, the agency must pull enough capital to cover all respective claims over the next 30 years. that is where the report indicates a potential shortfall. that news generated a fair amount of media coverage, and provided an opportunity to engage in what my colleague john griffith has dubbed, bailout hysteria. there is nothing about the situation that can be fairly turned a bailout. the housing team here has been working for months to try to take the conversation passed myths and overreaction to educate folks about fha's critical roles of stabilizing.

a few of our most recent publications are available in the back outside those doors. one of them is an issue brief that we have entitled, fha saved the housing market. some of the findings in that piece were quite remarkable. according to some previously unreleased analytics from they's, in 2011 alone, agency's work prevented home crisis for implementing an additional 25%. that is estimated to have saved 3 million jobs and $0.50 trillion in economic output. it made sure that qualified or worse still have access to the american dream even in the middle of what turned out to be a long economic nightmare -- owners still have access to the american dream even in the middle of what turned out to be a long economic nightmare.

and now, to our program. we're pleased and honored to welcome carol, the acting fha commissioner and assistant secretary for housing. as acting commissioner, she has direct responsibility for overseeing close fha 0 $1 trillion insurance portfolio that includes single and family $1 trillionfha's insurance portfolio that includes single and familiy housing. -- family housing. she was also voted one of "housing wire'cos" influential women in 2012. to insure we make it through the program, carol will join the other panelists later in the session to take questions.

without further ado, i would like to introduce her. [laughter] [applause] [applause] >> thank you for hosting this event. it is an important occasion to be talking about the future of fha under the current circumstances. i am delighted to be asked to be here to do that. i have a short slide presentation that i think would be very useful to ground the conversation for the balance of the panelists. to be sure that all of us in the room are essentially on the same page about some of the facts around the current status of federal housing administration. julia said it better than i could just in terms of what the main points are that i want to make, which is that the work that fha has done prior to the

crisis but including in the wrap up to the crisis in terms of access to credits for home buyers and access to credit for people needing to refinance has been crucially important to ensuring that the economy has started to heal, and the housing market has begun to heal. without fha, we would be in a much more difficult situation in terms of the housing recovery than we are today. one slide i do want to show, it is on this point of our market share and what we did and when we did it. the reason this is important, fha had very low market share prior to the crisis. what happened during the crisis was a lot of what some would call reckless lending, prime

lending. fha did not go there. the reason we have low market share was there were many people that were being sucked in and to some prime mortgages during that period of time. fha was still requiring 30-year, fully documented loans. when people could go somewhere else, they did. it is probably hard to see for some of you, but starting in 2007, 2008, if you look at the blue bars, those are recent. as the market, private capital was leaving the market and the bubble was bursting, people who have mortgages with adjustable rate, they had nowhere to go to refinance. they are a large number of folks who got saved from foreclosure and default by being

able to refinance into fha. and you see the continuation of when private capital left. very few places where people could continue to access credit to purchase homes. those are the pink bars there. this is the second important point. the first pointk, the work we have done it in the housing market was critically important to the economy. the second point, as this was happening, fha was starting to take in 2009 very strong steps, understanding this was clearly putting stress on the fha fund. i have said this publicly before. i will say it again. i give a ton of credit to former commissioner stevens for initiating some of the actions that fha took during this time.

if you look at the slide here, the point is that the book of business that fha has been doing since 2009, really starting in 2010, when a number of the reforms that fha made started taking hold, is radically different in quality than the book of business we were doing in the crisis and the wrap up to the crisis. it really plays -- a ramp up to the crisis. it really plays out in ways the people need to pay attention to. what is the economic value of the book of business, what you can see, 2007 through 2009, the present value of the premium. the revenue stream was about 3.8%. the present value of the credit losses was 11%.

clearly you are in a negative economic value when you put these two things together. what has happened since 2010 -- 2010 through 2012 -- we significantly increased the revenue coming in to cover the projected losses, and the credit quality to the number of actions we took of the credit losses is projected to go down significantly over the life of these cohorts of loans. what you have is a positive economic value, very strong in the new books of business. what we're dealing here -- dealing with here is the hangover from the prior year legacy books of business. that is where we need to focus substantial attention. there are a couple of other ways to look at this. if you look at the credit quality alone of the new books of business versus the old books of business, seriously

delinquent, early payment defaults. actually comparing the same seasoning of loans. if you are two years out, do have a loan in 2008, what did it look like in 2010, or you got a loan in 2010, what did it look like in 2012. comparing two your seasoning -- year seasoning for these cohorts. radically different. after two years of age, the 2010 vintage is performing four at times better than 2008. five times better than 2007. these are the kinds of measures that you can look at. hard data, not projections. hard to avoid the new book of business is performing -- hard data about why the new book of

business is performing better. in the bubble bust years, the economic value of the fund was down significantly and the new books of business are quite profitable given both the pricing increases and the credit quality of these loans. i want to take just a minute to talk about the results of the actuary. some people have spent a lot of time understanding this, and others have not done in nearly as deeply into what the fha actuary is, what it does, and what it does not do. i think this is an important baseline to understand, at least for that near-term of what we are dealing with an fha. this is a point in time look at

the economic value of the books of business that fha has done to date. as julia said, what this actuarial is telling us is that an independent look into the fha's business that uses commercially available house price indices and interest-rate predictions to essentially project the performance of the existing book of business over a 30-year period, given certain economic conditions that are put into the actuarial. it comes up with the economic value. --t is your's i jury says over's acturay saysary says, that 30-year.

, we would be at a deficit if we had to pay those claims all out at one time. and if we had no additional revenue coming in from new books of business. it is what we would call it runoff scenario. there has been a lot of talk about, does fha need to tap into treasury resources and what we call our permanent an indefinite budget authority. this actuarial does not at all project what happens with respect to our need to tap into treasury dollars. that is done by an entirely separate economic analysis, and believe me, living by two different sets of economic projections for the same time period is not anyone's desire.

but that is the way it works. we have a statutory obligation to do an independent actuary, and to calculate a capital reserve ratio based on that independent actuary. we have a separate obligation under federal credit reform and federal budgeting projections to use the president's budget projections for economic consumption to determine whether we have enough money in reserve to pay for 30 years worth of losses. that is the number that ultimately determines whether we need to tap into treasury or not. that number is projected to come out in mid-february, when the president's budget is released. the other important aspect on the slide that i want to mention is all of this is around

projected losses over a long period of time. it is not a cash flow issue. fha has $30 billion in treasury accounts to pay for current claims and run its operations. this is a long-term projection of needs. this slide goes into a little more detail. a similar slide deck is available on the fha website. i encourage you, if you want to keep an understanding of these two different ways that we look at the actuarial projections of the fund, that you take a look at the website to do that. three important additional factors about the actuary that i do want to mention -- there are some of things about the results that some might feel are

counterintuitive. there are three main drivers of the actuarial projection, recognizing their over the 30- year of the books of business. the first is a look at house price appreciation, and how that impacts our claims and default rates. the house rate projection used in this year's actuarial were done by moody's analytics, and they were based on a july time frame. without getting into the weeds, these particular projections are somewhat lower than a think people expected given other projections out in the marketplace. the reason for that is both a timing issue of when they were done as well as -- they had to do it in a way that included a lot of activities to get an

index that can be used at the metropolitan area, which we need in order to project the claims best on the fha book of business. a little counterintuitive. the other is that interest rates declined from the time. -- from the time period from the actuarial from last year, and this can have an impact on the overall book. the last one, which is important, is the actuarial independently refined the model to predict the severity of claims in a much more accurate and specific basis, so they actually followed characteristics of the loans, how they were delinquent, what

geography they were delinquent in, and used that to do a much more refined projection of claims than prior actuarial had done. we think it is an improvement in to transparency and what we think might happen. let me spend a few minutes to get the panel started on some thinking around what should fha be doing, what has fha done about that. wrinkly, we want to be in a position -- frankly, we want to be in a position where we are covering our long-term projected costs, plus having a 2% cushion required by come across. we have taken a lot of actions already, and i will not review those in details except to say there are a number of steps that we have taken during these past four years that have been critically important to the fha

being in the position is in and that we would be in a much worse position if we had not taken the steps. number one was getting rid of the cellar-assisted down payment program as the actuarial report. had we not done that book a business, we would be positive by 1.7 $7 billion instead of negative by billions of dollars. that cost fha $15 billion. we made changes in our downpayment requirements. again, i credit commissioner stevens for this analysis, but raising down payment to 10% for -- for bortrowers, you can look at the impact of that on a positive basis for the

overall projections of the fund. we increased premiums for times. again, that raised significant revenue. probably not talk about as much is the development of the office of a risk management that actually now has and continues to build robust analytic capabilities to look at emerging trends and problems in the portfolio in a much more timely way than fha was able to do in the past. i will show you any minute, that is an important improvement that helps drive other savings throughout the fund. two things of the asset management site i really want to mention, because again, our belief, when you go back to the earlier slide, is the challenge for fha right now, is in that legacy book a business, so we

need to spend significant time and effort to ensure that we're doing everything possible to in nepetaass berries business that would make that less of a value of the fun. we have and to enhance the enforcement capabilities of lenders, said getting rid of fraudulent loans and insuring that we do not continue that going forward has been critical to improving the quality of the fha book of business. the other on selling notes as opposed to this is the selling of the actual loans, as opposed to allowing these loans to go all the way through foreclosure as very important economic effect to fha. we ramped up this program is starting in september. we did a large note sale, and

people do that on an ongoing basis for the next year, year and a half, to ensure we are getting the best recovery on the distressed assets that we have. now, moving forward, those are things we have done in the past. we're taking a number of actions today and people continue to take action to attend due to everything we responsible inappropriate to ensure that we bring in revenue and stem losses of the fund in this stressed time. on the asset management side, we issued game letter which gives directives to lenders where we redesigned our loss mitigation waterfall too easily help distressed borrowers reperform under modifications in a better way than they have been under

our existing world. why is it important of which will save money and we will save homeowners, keeping them in their homes. spending time on these asset management activities, while they did not grab headlines at as other activities we do, are very important. streamlining our ability to do short sales for our workers who cannot reperform under mortgage market occasions, we will file lawsuits, so when you have a seriously distressed homebuyer enabling them to do a short sale will help them and the fha fund. we're going to take some of these lost mitigation activities and we are going to ramp up with icers they are getting

we agreed we will get higher take-up of the servicing of these loans which the policy changes that we have made. on the origination side, we are increasing premiums to some degree, at 10 basis points on an annual basis. it is an important measure to take given where the fund is. we are very mindful that we have to be careful about adding additional costs on to new borrowers on loans that are already profitable, but at the same time, we need to ensure that we can bring in an additional revenue, which will be helpful for the fund moving forward. we are reversing the policy that has been not long standing, but standing since grant 2000,

automatically canceling mortgage insurance premiums when the loan %. f-amortizes down to a 70 are reversing that policy for an ongoing period of time. we did not get off the risk when that premium went away, so we feel is important to be receiving the revenue we know we have some defaults that happen after we have canceled the mortgage insurance premiums on those loans. this is an example of having a robust risk management office, she looks at the analytics that understood that this was becoming a bigger problem, particularly in a low-interest rate environment when the self- and the authorization was happening quickly, because

interest rates were low, and on the other it hand, we were at a place where property that years were declining. this was a policy that might have made sense in 2000 si, but not today. to have an office that can dig into this information and make policy changes based on what we are finding. i am not going to go into every action we are taking, but i hope what people see from this is that we are continuing to be aggressive about taking action and insuring that we can put the fund in the best position possible, while balancing the need to provide access to credit for were the home buyers and helping neighborhoods and the nation, frankly, keep its fragile housing recovery going. thank you all very much. [applause]

>> thank you so much. that was a remarkably clear and insert -- informative presentation in a short time. we appreciate that picked it is my pleasure to introduce a our impressive panel. we will go in alphabetical order. quercia is the director of the unc center for community capital. it is a key partner and our housing issues, and we are thrilled to have him with us today. david stevens is the president and ceo of the mortgage bankers association. he was also president of the first fha commissioner from 2009 until 2011 and has more than 30 years experience in mortgage

finance even though he is 25. joseph tracy is a senior adviser to the president of the federal reserve bank of new york. his work for their focused on urban economics straight joked recently co-authored several papers on fha's risk-management and brings a wealth of expertise to the panel. susan wachter is a richard worley professor of financial management and professor of real estate and finance at the wharton school. even more important to us, she is an active member of the mortgage finance working group, a coalition of experts, affordable housing advocates and and the academics that gather to grapple with the many challenges in this area. last but certainly not least, a very familiar face to cap, sarah rosen wartell, president of the urban institute, but far more

importantly, she is the co- founder -cap and served as our executive vice president and she is responsible for so much of the work we have done in the housing area. prior to her time at cap, she served as the deputy assistant for economic policy and is the adviser to the fha commissioner. she is a member of the mortgage finance working group. moderating our panel today will be nick timiraos of carroll call -- of "the wall street journal." previously covered the 2008 presidential election where he traveled with the obama campaign. nick, i will turn the podium over to you now. >> thank you. let's have everybody take the seat.

thank you all, and thank you for coming. i look forward to our discussion this afternoon. instead of doing opening statements from each speaker, i will ask a generic question that can maybe help frame the discussion, and then it will go from there. sarah, i will start with you. we will go in reverse alphabetical order. the question i posed to you is maybe if you could identify the most important lesson that we should draw from the experience of the past five years with respect to the fha, and then

part of that i might ask is whether lawmakers and taxpayers should be prepared to accept some level of loss, given the housing recession that we have been through. sarah, i will start with you. >> thanks, and i have to say how much fun is to be back debt cap -- to be back at cap. the big lesson regarding fha is a core concept of the federal housing policy worked. it did not work as well as we like to get, it was not as nimble as it could have been in a crisis to protect taxpayers from losses, but the key idea that fha was created around was this notion of reciprocal

holiday, and at that time when private capital withdrawals from the market, preventing that enormous bubble boss, preventing the elimination of access to credit when credit capital has good reason for not wanting to put it new capital at risk -- if there is not an alternative source of capital, the economic pain from that up and down cycle is far greater. what it does is it is a smooth and mechanism. it is absolutely the case that fha is going to take losses for those books of business, giving -- given the enormous 30% house price collapse. that was unprecedented since the great depression. the idea that in doing it it not only prevented greater losses on the books that fha already had -- if it had shut its doors when the market got type like private

lenders did, it would take in the greater losses, but di gse's lenders would have taken far greater losses, and the bounce of american families would have taken far greater losses, because it is not simply that the individuals were able to sell their homes to people who had new financing or could downsize when they cannot afford their money, but the people who did not sell their houses did not see their home values collapsed as far as they would have if there had not been credit availability. counter-cyclical break is an essential tool of public policy, because housing is such a big piece, and if you think about what we spent on the

deduction each year, if you think about what we spend on an array of whole housing policies, we will avoid ultimately long- term taxpayer losses, but it is unclear. if we do not, those costs are probably still going to be modest in comparison to the costs that were avoided. >> susan, i will ask you, most important lesson you would take away. >> the key point, this system is protest cyclical. the private system is part of what we get with the private sector, and we have in the to more cheryl mortgage-backed securities markets also where prices there fell more than they fell in the market. capital pain in, and that was

poorly underwritten. capital seized up come up with true, and prices plummeted. that market is coming back, and that kind of volatility is not something that is of a concern to the public, but when it is involving people's homes, it involves families, wealth creation, wealth destruction, and it goes further to issue the stability of the overall democracy if we destroy family's wealth. it also has implications for the housing wealth, because that is what the financial system depends on if that goes, the financial system itself blows up. which is what happen. to counter the cyclical system

is to take a different direction. the implementation of that means that fha did not and should not have attempted to compete with the private sector when it put out underpriced loans in the years 2000 -- 2005, at 2006, and 2007. at that point the market share plummeted, and there were recommendations that the fha needs to keep its market share, why does it not attempt to compete? that is exactly but it needed to not do to protect itself, and to protect the future of barrault worse. and the gut -- -- borrowers. the tide did go out and we saw imperfections in the fha model,

and assistant seller was one of them. the commissioner appointed to that in terms of the new risks office. >> beyond counter-cyclicality, either in the other lessons we can take from the past five years? >> an important lesson is trying to do everything you can to be as transparent as possible. a key element of the argument over to what extent did the fha's lending assist the housing market gets back to something that is oftentimes stated as a key goal, which is sustainability of the home ownership and experience. subsidized credit is not a long- term solution for 8 necessary market adjustment. the question is how has the fha

been doing on the sustainable home ownership goal, and there is key in terms of doing the best do we have the right metrics that best insight into that? sustainable ownership is about the borrower, the time they come into the system to the time they end. the challenge in terms of data is that there is an internal refinance program active in the fha, so it means a number of borrowers go through multiple mortgages over the course of time with the fha. the metrics cannot allow you to follow the bar or across those mortgages were if we want to ask what percentage of borrowers that came in in 2007 have defaulted or successfully paid off their mortgages, all the credit risk, we cannot look at data and make that determination. they may have refinanced in 2010, so it looks as if the 2007

mortgage is paid off and that is a good outcome. a subsequent default on the internal refi either not counted or not contributed to their refi took place. it is not a technical problem, from but we'd want to know what percentage of borrowers, how are they doing, and that will become when we talk about the analysis of the value of the fund an important question in terms of how that analysis is being done. i think it should be borrowed were based and not mortgage based. >> a few years ago, the fha had said this day would not come,

and typically you are right, it happened, the fha has not had to draw on treasury. now the course since to be looked at all the benefits that the fha has provided to the market. as the fha -- there is a criticism that the fha has strayed too far from its original mission. do you think that is a fair criticism from this point of time we're in right now? >> you could argue the gse's and fha have all stray from their mission. we have this constant dialogue about getting private capital back in the market which is a broader discussion. fha, it is interesting this debate has not -- has ensued, because i think fha is a great success story leading up to this. lehman brothers failed years

ago. top funds were paid up to many institutions to keep them afloat. fha has been doing 3.5% down payment financing, and even low credits corporate borrowers, and despite all that, at this end we show fund could go negative in the out years, and for those of you who read the actual eric, only a runoff scenario, and only an assumption that the fund never goes negative over the long term through when you look at replenishment. yes, it has gone beyond its mission. the loan limits, doing these large jumbo mortgages, some could argue is going well beyond what it was meant to do. it is providing liquidity where

there would not be financing in those markets. i do not believe those are components to risk. it is a question about mission. this larger loans are not the performance concern of the fha portfolio. if you bifurcate and study the portfolio itself, the 2005 to 2009 book years, prior to the to, thes just referred premium increases and the risk changes, has changed the performance outcome, and if it was not for those books, the impact of the fund would be significantly worse. we need to be careful not to over correct an environment where the current portfolio is looking to be strong, and this continues to be a story about downpayment assistance, tinkering with payment measures when that market share but to look up and allowing credit

disciplined to be removed from the organization, which is not the case on today possible. >> roberto, for folks who say 78 years, this is an agency who has never required a net treasury assistance, should we be given all the things that all the panelists talked about, be willing to accept some level of loss today? , the short answer is yes, but it relates to the overall conversation. i do not think fha has strayed from its mission. if you look at the creation of thefha in the 1930's, private sector was bifurcate. at times that is counter- cyclical. at times it provides support

credit to credit-worthy families. at times it created new products. before the 30 year mortgage, down payments were 50%. it created a 20% down payment, 10% down payment, and that was in 1961. it worked for many decades. i think the reason why fha went up to 700,000 was people in california were not able to go from the -- to get from the private sector at any lending. when the private sector collapses, -- and so to me, the current book of business -- what

the traditional mission is. that is a normal adjustment, but i would not say it is not on its mission. >> when we look at the next couple years, in the near term, are there additional steps that the fha ought to be taking to protect itself against losses? when you were at an fha, there was a role to cap cellar concessions. the rule was proposed a couple of times. they were extended above the gse loan limits where you could get an fha loan bigger than any gse

loan. those would be two on the table. you sometimes hear about risk- based pricing, that fha should be considering. >> i propose to the seller concession change and i think fha should not have policies in place expose that in that regard. let me talk about the risk-based pricing. i hear it comes up from time to time. one of the mission roles that fha has served is an access point for demographics that otherwise would not gain access to the home buyer market. if you look at the way pse has priced the mortgages today, at the high end of the curve, it gets expensive for no down payment borrow worsers. if you can control for qualification, for documentation

standards, credits or the ability to repay variables, the down payment should not be a variable and tell you get into a distressed scenario. you can control the distress by we also know down payment is the single biggest barrier to home ownership. it particularly in packs those borrowers who do not have large amounts of inherited wealth or disposable net income. it is heavily predominated by first-time home buyers, african- americans and hispanics. 80% of all mortgages last year getting a loan to the program, because there is no other resource. given that, those are expected to perform very profitably for fha. my worry would be if you risk- based price, you create societal impacts the do not reflect the

quality of the loans being originated in the first place and cause a disparate impact unnecessarily. focus on credit quality and try to avoid terms that create adverse selection. not over correcting in such a way to have unique outcomes demographically. >> anybody to add? fha does not have too many lovers. =-- -- levers. would you have a concern that you raise premium so high and drive away the best credit and have a traditional insurance modeled deterioration, where you are now bringing on the weakest credit while driving everyone else away? >> we have a tricky conceptual issue with of the chip. -- with fha.

if we thought the mortgages would not pay for themselves under the most reasonable economic scenarios, then it would make sense to tighten the credit further or raise the cost further. we have been raising the cost a lot. we are able to do that because we are in a very low interest environment. we may find ourselves in a different in varmint in which they will have less choice. the actuarial estimates are that the fha books of business will more than pay for themselves. what we're looking for them to do is pay for the losses we incurred when we were playing a counter-cyclical role. the phrase i always use, it is inherent to an insurance model.

fha does it for a public purpose. there is a point at which -- i have had plenty of economists argue that it is not rational for us to charge today's home buyers more than it costs us to pay for the losses of the past. we had a large, traumatic, national emergency. think of it as the hurricane sandy or hurricane katrina of the housing market. maybe the public sector ought to say -- the economists say we should write the check for the treasury and we should go back to starting the future homebuyers at a price that is rational. i am willing to do a temporal cross-subsidization. i do nothing we have the political will for the financing mechanisms to pay for the bubbles when they come. i think we should do that.

there are limits. limits in fairness to the future homebuyers and limits to what you can do with pricing. when the private market comes in, they're going to take those and take the business away from the fha. i will celebrate that, because that is business that the private sector should do. we are waiting for it to come in order to get them into that market. >> any changes you think the fha ought to be considering? sometimes we hear about the fha crowding out private capital. do you think there is a case to be made to bring the fha loan limits down? >> no, i do not. the product -- the problem with this point for the private sector is it is not they're not all may for the 700,000 and

under. it is not there for the 700,000 and over either. the private sector needs to be repaired substantially. it is not there yet. there is great fear, an aura of toxicity over the market. there is lending going on, portfolio lending that is being done out of relationships. this is not at scale. right now, there is a great deal of work that is being done. sec is proposing their securitization rules for plumbing. all of that has to be in place with far more sense of security going forward -- there is no alternative. in the meantime, there is a chicken and eggs story here. if we did not have stable markets, that would be a separate reasons.

how do we assure that we do not have the kind of crisis? we have to make sure we do not take any major steps away from the support to the market that is there to destabilize the market. the market is strong, -- strong is the wrong word. it is recovering. but it could be destabilized. picking up on what sarah said, it is totally appropriate that a long-term pricing be adjusted upwards to recover from borrowers in this period. it would be a major mistake to price immediately the loans to recover the next few years. as a long-term prospect, it makes perfect sense. that relates to what david was saying. another problem with pricing is

the logic of it. you do not risk-based price one moment in time. you risk-base price for next year, whenever you see. the bar or risk changes over time with the -- the bar or -- the borrower risk changes over time. it changes again the following year and will lead you to price risks. that is exactly what the private market does. the private sector, as we know, was up to $1 trillion at its height. that went down to where it is today, $1 billion. those are the kind of swings you if you go through the risks that are in the market at the time. >> your point is, when people say there is a capital re that comes back, it is not.

>> is not there yet. i think it will happen. again, there needs to be the funding in place to have a sense of transparency. i put out there, a major point for quite awhile, the need for transparency, not only for the public sector, but particularly for the private sector. that will help bring confidence back. it is not there yet. >> you talk about sustainability. when we talk about the fha in the medium to long-term, and we have heard some criticism that the down payment standards, 3.5%, they were 3% in 2008. there was a push to eliminate down payments as early as mid- 2008. you heard the criticism that this is not helping the people that we're trying to help if, in a declining home price environment, folks may be upside

down from the minute they walk into the house. do you think there needs to be a rethink where the down payment limit is, either now or five years from now once the housing market is more on the mend? >> it has a lot to do with what our expectation is in terms of how the economy is going to perform and what will happen to the trajectory of house prices. in an environment where the economy is strong, house prices in most markets are, at worst, flat, generally rising. i would agree that borrowers will be accumulating down payment, reasonably steady income. the risks of default are manageable, covered with in the premiums. the problem is we feel we are in an environment of slower economic growth. there is not a lot of when under the sales, which means that the possibility that you can have recession is more likely

because you're starting from a lower growth rate. house prices may be on a much flatter trajectory. then it is a question about whether the low down payment program is necessarily the best, even for the borrower. when you factor in -- and here is where downpayment does matter, because it is the culmination of a bar or -- the combination of a borrower, that is the determination of whether you get a default. the possibility that house prices decline in your market. house prices are very sensitive to what is happening in the economy. then we could see default rates start to move up again. that is a question of how do you balance the benefits for the folks who make it through and gain access to home ownership earlier than they would have

otherwise or maybe they never would have owned purses the cost of the families that will go through a default and a foreclosure? what is required sustainable home ownership? it is a difficult question. it is one we need to be mindful of when we calibrate this public policy around how low do we want to push those debt payments. when things are getting better, than you can start lowering the downpayments. that is what we ran into with the subprime problem. >> if you raise a down payment, interest rates are low. it is already difficult for some folks to save. their equity is gone or their other sources of downpayment have also been hit by the recession. is there too much emphasis on raising the down payment right now? >> i think it is.

as important as down payment is, at the moment, i do not think we are out of the woods yet. increasing downpayments now would hurt the fragile recovery we are having in the housing area. i would be very careful to do it now. as we get out and the economy gets better, again, fha has 3% down since 1961. if you price accordingly, that is fine. there is a reason the down payments and loans are sustainable. once we go back to normal times, whenever that is, i think that we can have that conversation.

>> this debate has gone on since i was commissioner, when the funds went below 2%, the reserve did. i have heard the debate over 3.5%-5%. at the end of the day, is that a measure unto itself that will create immeasurably greater risk control for the fha as opposed to having a good credit management protocol that requires underwriting standards that will provide sustainability? you can eliminate risk in its entirety. he can acquire 20% down payments and all sorts of other variables that will ensure that you have no risk. fha is a neat program. it has an extremely high mortgage insurance premium applied every single mortgage

that can support -- and it is a terrible way of putting it, but it is a fact -- it can help prevent teen delinquency rates. this country was on a housing bubble the was promulgated by bay crisis. you create an unsustainable and farm for anybody participating in that market. it impacted the housing market and a whole bunch of other markets that were impacted in a significantly adverse way. i find it really interesting, when you look at the fha portfolio compared to all of the other mortgage portfolios that existed, it is the one that has survived in the most healthy manner compared to any of them, with the worst credit attributes. as recently as 2012, the past

both years have caused strain. even beyond that, it is still going to go positive with the future premium. there is no doubt that a bigger down payment is better. no doubt that more private capital engaged in the market is better for housing. this is the son of an unhealthy market. i have said this continuously. we are in an environment where there is no private capital coming back. ratings agencies are not trusted. mortgage insurance as a way to combat so that they will value higher products. private investors do not trust the mortgage-backed securities market unless it has the best loan values. in the interim, we are caught in an environment where we're losing support until we have a replacement vehicle in place. we talk about getting the fha out of the market. there is very little time to focus on the pathway to private

capital. that is the greatest challenge. you can lower loan limits and those are not the risky loans. if you reduce fha's role, it would hurt home buyers in san francisco. the key thing is hurting the rest. look at the premiums that are being charged. if we can maintain that focus, the risk regiment focus that the fha has taken on, there is an argument to say, let's not over correct in a time when there is no support system coming down the pipe. >> you talk about the importance of having good underwriting standards. one of the other criticisms of fha is that it is a government agency that is not as nimble. long-term, if you have 3% down payment, it is one thing to trust that the lenders to use the program will operate according to the guidelines, but

does the institution have the bandwidth to change circumstances? even if it were not as severe as 2006, say we go through a period where congress allows downpayment-funded assistance. how able is the fha to set those proper underwriting standards? >> there is no question that the fha any other agency needs to be more organized and what we have today. -- than what we have today. fhfa it is 80 years old. it has never required taxpayer money. the fact that we have a 1000- year flat and fha has plans for

a 100-year flat, it is unfortunate, but it has worked out somewhat well. >> what we should be thinking about is, how do we take advantage of this opportunity to learn how to do the modernization that roberta talked about? we did learn about ko'd during this crisis, when fha wanted to change its standards and eliminate a program that was clearly costing it a significant portion, having an agency which does not have the authority to act quickly or to try out new products on a small scale before they decided they make sense on

a large scale is not nimble in a federal, statutory set of guidelines. one of the things we're trying to develop is, how do we make sure that the fha managers do not have to go back to congress every time they want to be able to take steps, to take a risk mitigation actions that a private lender would be able to take? you have to be willing to have transparency about how well you're meeting a metrics. the officials who are in charge of managing the fund, they will do that better than a process that has to go through the natural legislative process to get those answers in place. we saw that with down payments.

that was a program that many members of congress believe are in the same place. we could not get the week -- we could not get them to turn the spigot off. it took a long time to get them to go along with it. we need to come up with risk mitigation tools for fhfa. -- for fha. we have not gotten to what the future system should look like. especially in a world in which we will have the gsc's and conservatorships will also be a truck and protects -- and transformed into something that protect the taxpayers, that we, in that world, we empower policymakers at fha to be able to protect itself from risk when

the emerging system might have hiccups of its own. >> you co-authored a paper earlier this year looking at whether the agency had done proper modeling for its risk. one of the headlines was a potential 30% delinquency rate on those 2007, 2008, 2009 books. do you think that the agency has made the kind of changes needed to properly estimate what their potential loss exposure is? >> we heard in the opening marks, and if you go back and read the last several years of reports, discussions about innovations in the risk analysis. hopefully some of the work that i have done helps to contribute to that thinking. it raises a broader question, which is, clearly, entering into 2007 and going forward, the fha

was in choppy water. you want the best compass to try to navigate. there are scarce resources. doing this -- these types of risk analysis are very complicated. if you do try to read the book, it is very detailed, very difficult. the issue is, how do we get the best thinking possible? suppose the innovations that went into this year's audit report could have been innovative in 2007. how much better with that have been for the folks who were trying to manage the fha to have that much more early-warning? we either from more dollars added to get more resources to the fha or adopt a different model. think of an open source model, where the fha says, we are going to put all of the models up there. we will make the data available. we want to encourage outside researchers to kick the tires

and give us your best thinking. let's try to speed up the learning curve. this was an approach taken by the bank of england when they gained independence and put out their first monetary policy report. they put on there website their forecast, the data, the models, and they invited economists to critique the models. they viewed this as a welcome thing. that is a challenge. are we moving down the learning curve fast enough in terms of doing this kind of risk analysis? if not, then i think we are losing out on the ability to steer the program better. this is something that is worth discussing. >> every year, we have heard that the past few years have been bad, but this year is good and next year will be even better. in the following year, it changes a little bit. we have heard the same things a couple of times. how much confidence should we have that the 2010, 2011, 2012

books will hold up very well? the earlier books did have a negative economic value. >> it is a model that is based on the home price index and interest rates. those are the biggest drivers of the model itself. some would say the unemployment drives that outcome. those of the variables were you see the greatest swings. what impact did the reverse mortgage program have? it had a particularly the -- it had a particularly adverse impact this year. that is because of variables that are driving that outcome. if it goes back -- going back to what joe was saying earlier, we need the economy to keep recovering and the performance would be better. if you look at the study, and i think they have done a good job

, there is a variety of stress testing that goes on in this process. they did not show all the simulations, but they did show what variables work. there is an attempt to be far more transparent in the study. obviously, forecast our forecasts. -- forecasts are forecasts. >> in order to create a capital ratio or a budget for congress, you have to create a point. the notion, in the real world, you're looking at a range of possible outcomes. the point that was chosen is based on the set of the best assumptions about house prices and when the recovery would come. you can ask most policy makers in any government program that is affected by the economy how quickly they thought that those things will start to improve. for the most part, economists

were predicting return to growth in the economy and increases in employment sooner. the biggest reason why we thought the next year would be better, we thought the cost of the poor mortgages that originated earlier would be less than they turned out to be. that is because the economy turned out to be weaker and the sustained suck on the business, those people's lives, was not relieved by its improvement. >> the 1 data element -- and carol had it on her slide -- look at the seasonal delinquency curve. there is a clear performance variable at the same seasonality from the 2005 book until the 2010, 2011, 2012 book.

they're different outcomes. >> even in a stable period of time, when we are looking a delinquency rates in the low- teens, is that a reasonable level of serious chilling wednesday? we are going back to the issue of sustainability. >> i would like to switch from short-term delinquency to looking at a cumulative one. ultimately, the question is, what is our tolerance for failure? i would argue that our tolerance for failure is different in different economic circumstances, especially for counter-cyclical organizations. the amount of cumulative loss -- cumulative loss is the number of families whose homes and lives are destabilized because they lose the ability to have their

children grow up in the community and home that they are in because they cannot afford the mortgage anymore. that has social development effects on kids, community effects on the home values. what is the right label of failure that we are willing to cede, to accept? in a well-functioning private market economy, the role of fha is to give other people the ability to access the benefits of home ownership and the ability to access the wealth- building attributes of home ownership undermost economic circumstances and the ability to create to stabilization of communities through skerrit -- for shared ownership. that benefit, which we, as a society, have over-emphasize, but needs to be part of the middle-class lifestyle, we want

to add at the margins. if you take 100 marginal borrowers, we have an idea in our minds, under good economic times, how many of those we are comfortable failing in order to get the others success. in good times, a failure rate of 10 is a question. 20 is way too much. a five-year rate of five is plenty, especially if the losses to the fund are not that great. a failure rate of 10, we are starting to think about that. under a stress environment, you tolerate a higher failure. what are the costs to society and the cost of that failure? we are starting to answer questions about that.

we have not looked at it hard enough. it is really interesting going forward. >> one of the challenges is the chart we're showing does not answer the question. it shows you the cumulative default rate on mortgages, so at every one of those understates the reality of what fraction of our worst -- of borirowers went into the legacy. if they are excluding debt refinances altogether, that the minutes he is not being shown anywhere. we cannot deal with the tough question of what is the trade- off if we do not first measure the question.

i encourage fha to redraw that chart where you link the borrowers, and then we can say what is the reality. >> that is a useful metric for analysis. that is where i think that the strength of personnel is. for the bigger question of what rate we are comfortable with, if we go with that metric, you will see there is a bifurcation in the data, there are people who will be more likely to fail and people who are likely to succeed. a 5% failure rate sounds reasonable. in a world where you do not expect a disaster or a significant recession, that is where we are. the reality is we have recessions, and sometimes they

are serious, like the great recession that we just have been through. when you factor -- and we cannot predict those. shall we be planning for these? we have no idea when they may be happening. what we need to be planning for is for assuming moderate, predicted call -- predictable, with some up and down, and here is another reason we cannot plan for it -- we, fha, cannot determine what the failure rate is, because the failure rate will depend on what other providers of mortgages do and how they underwrite their mortgages. it is all one pool. if we have another -- and the private sector will come back -- when they come back, there will be closed capital which

will be cyclical, and that will raise prices and it will cause bidding races for homes as before. their book of business and their failure rate, which we cannot control, will in fact impact the volatility and stability of the overall housing market and therefore a fha outcomes as well. that said, a long-term mission of fha has to be those people who can beat today underwritten to be in their homes for the long term, using the best metrics we have. those are the loans we should be making. >> two quick points, it is great weekend have a panel and debate

fha. it is one of the most scrutinized lenders in america. we did not get that opportunity for other firms that went through there and crises. that is an interesting variable. if you go back to the question, is fha capable to handle their creaky organization? i think that is where the debate lies. we want to help fix fha. you can shrink them forcibly because he did not want the baby and your anti-government. that is a separate debate. the want to help fha, give them the ability to be flexible, invest in systems, a higher risk management people, contract with forms that wanted to effectively, to do reviews, etc., and the more you contained in their ability to control their risk, that is where the taxpayer gets harmed. their systems are antiquated and

terrible. when sarah was at hud, there was a plan put together to talk about a different structure for fha, where they would take their own proceeds and reinvested back into their technology, like a business can do, and the fha is restricted. i had to go to congress and ask them to draft a bill and get legislation to allow us to raise premiums to protect our risk. that is the proposition for success over the long term. that is where the debate should be. how do we make this realization most effective, with best deals, best credit risk, so they can support the system and a little less about let's continue to pull the support out from under them. >> can you do that, because if you can, then the things you talked about are true. but if there are limits to what legislation does or does not

do, and doesn't that raise questions over all these other things? a lot of the loss mitigation of the administration has been trying to encourage the private sector what they are limited to do on their own book. if you are making low downpayment loans and think principal reduction is the right way to deal with underwater borrowe3rs, that is where i am going, is that achievable what you are talking about? >> say with great respect to my friends on capitol hill, any group with 535 people do not write underwriting standards well or manage the technical aspects of the business well. there are many examples of policy frameworks with metrics for performance and transparency that then do not have the details being decided

by the legislature body. if we were to look across government agencies, what you need to do to get people comfortable with that is you'd need to be able to do two things, show how the flexibility works and used to protect the taxpayer, and you have to be clear but those protections are, and you need to create methods of transparency and accountability that get people comfort that you are not going to take it off into the private sector. the has been some members, policy members want to take credit for a new innovation or a orrowers being served. this experience is a moment when people can see that that, taking

credit for the good means you have a barrier to protecting the taxpayers against risk, and that is the moment to talk about going to a performance measurement system rather than a prescriptive system. >> i cut you off. >> whether it be 5%, 10%, this is what you cannot micromanage or congress can micromanage. this is to price these so we did not lose money. to the extent fha does that, it is better suited, and if you have to go back to congress, you get involved in the political process, it takes time to get it done, which it did with the downpayment assistance program

three or four years later. the more fha can assume some of the powers to stay in business, they should solve that. >> i appreciate our discussion. there may be folks in the audience who want to get in on this. we will open it up for questions. if you have a question, and to give yourself and ask a question in a relatively short time frame. or i will cut you off and asking to state your question. is there a microphone? there is a microphone and we will -- >> i am with the national association of hispanic real estate professionals predict that you very much for an excellent and balanced presentation. the commissioner stated that 73% of the fha loans were going to first-time home buyers. 50% african-americans, 49%

hispanics. my question is do you know what the data is in terms of how many loans in total are going to first-time home buyers, and in the short and long term, and terms of the world, a first-time home buyers will have, you see their impact in the recovery of the housing sector? >> at vijay puts out a report and breaks down this data. i encourage people to look at this. it is on the web site. 43% -- [indiscernbile] 43% of home buyer loans are at the take, because we have a high share creek is a great report, and there is a monthly report which they break down all but volume of refinance purchases,

and they break it down for home buyer categories, and it is public information, so i encourage people to look at that. >> what does this mean for the overall market, and it is critical for the overall market that there be a first-time home buyer market. this is 43% of it. there you go. >> i am tom stanton. i teach at johns hopkins street, i would like to talk about administrative capacity, which is different from the discussion of authorities that congress might give fha to adjust premiums or what ever. i am curious, sarah, you and nick would see this and that made 1990's thought and the private mortgage industry killed that so fast all of our heads spun. i was told how much they

disliked the idea. what are the politics this time around, because that strikes me as one of the few ways one could get to the improvements in people, processes, and assistance. >> well, my experience at that time is one that i think about a lot, what the opportunities are now. at the end of the day, there were two sets of ideas embodied in the proposal we had at the time. one was the ability to deal with the administrative flexibility and hiring a computer systems and the like. other was programmatic, giving us the ability to essentially doubled the products that we serve a long performance measures. i think the real objection to what came from folks in the industry was about the product

flexibility because the ability of congress to micromanage the product meant industry players who were feeling competitive with fha had a mechanism to try to put downward pressure on fha's loans in their face. fha should be in the private sector must face only went in needs to pursue its function. there is always around the margins a debate about where that is. those dynamics not any different today. that said, we were talking about that before, which is that fha was plenty healthy at that point, we recovered from the debate, and we were trying to be relevant to the market. today is a very different world. there is no debate about whether fha is a relevant. the principal focus is how do we make sure it serves the purpose without exposing taxpayers to too much risk, and the notion of

more flexibility attracting higher skills, improving computer systems is much more attractive. in my highly -- and i highly optimistic this can be done, with dynamics being similar? perhaps not, but the imperative is much clearer than it was at the time, and there may be ways to disentangle flexibility is that will separate out the risk management, and i would argue for product innovation, but from the flexibility from designing products. >> there is another difference. based on the theories of the credit reform act, fha caps directly into treasury, and in terms of a government corporation, you need an act of

congress for any money to cover in the economic value, and then you need -- and that can be more politically difficult. >> fha is a corporation already, and you know more about that. many ways that does not answer the question. the question is a government corporation with what powers? we use a government corporation as a shorthand for something that is less bureaucratic and more able to operate like a business within the parameters of federal support charged, and in some ways the question is what are the authorities to protect for risk and to design programs, and does have positive and negative consequences. >> there are ways to come short of federal corporations and give

it fha flexibility to reinvest some of its premium or negative subsidy for the budget back into the system. one thing i find remarkable about having to spend some time inside a federal agency is you get funds appropriated for a new systems technology environment and that takes years to research and build as anybody knows from the private sector if funds are available for that year. all of a sudden you have these awkward and disadvantageous incentives to spend money in a short period of time when he would rather be able to do it thoughtfully, and the constraints of working in an annual appropriations cycle in a business that has flexes inward and outward based on market dynamics, and be helpful if congress gave a party to advocate the use is-subsidies back so they can do this on a canoe scale. it would give them an incentive to continue driving-subsidy back

to the budget in order to have that flexibility. so you would have a belt in incentive to drive better quality for the tax payer. there are different ways to get there without having to get to fha corp., which has been one of the examples that has been discussed and debated over many years. >> any other questions, either for the panel or the commissioner, who was also here? >> national association of realtors for it, i have a question for carol. 100% i understand the rationale of that. is there a risk of good quality borrowers leaving the program and refinancing out of fha? what is the impact on the fund up on that? >> yes, we have in analyzing

what the reversal of that policy would do in terms of the overall economic value, it assumes a certain number of people are going to refinance the out of the book of business. that is built in to the economic model. i would also say that obviously, it depends where interest rates are, but people can do a streamlined refinance three years from now and take advantage of where rates are actually lower, and stay in fha. there is a variety of options for people. we do not think it is bad if they have the ability to refinance out to go do that, an fha will have served its purpose, covered its risks, and that is fine. >> any other questions? if there are not, i will ask

one. maybe i will ask the commissioner this question -- one of the things we did not talk about that the fha has also been doing is legal settlements or lawsuits with the department of justice, and there is a push to change the language over what lenders would be responsible for with respect to fraud. obviously, there has been a problem for a long time -- fha has been pretty aggressive over the past five years trying to root out bad actors, but i wonder how you would calibrate that balance between ensuring that the program is open and that lenders did not come in with overlays. have seen that with gse's, not so much with fha, so i wonder how concerned you are that any kind of increased uncertainty would lead to a pullback in fha. >> we definitely want to create

rules of the road moving forward said that it is clear for lenders, what is material, where we are going to be concerned about, what they have underwritten or have for servicing, and making those rules as clear as possible so that everybody knows moving forward what the rules are, and i think the environment that we have been in these past five years is that some of those rules have not been as clear to people as they would have wanted. that has created one of the factors. there are multiple factors while lenders are creating overlays. i think this is one of many. you can ask dave percentage he thinks this is, and that is whether lenders' perceptions, what percentage of the five reasons they're pulling back on

credit -- everybody will have a different perception of what the litigation risk is versus servicing risk or servicing compensation, or a whole for item of things that are going into the credit overlays, but we are committed to getting rules of the road clear it moving forward so that people know. >> one of the great concerns we have is this thing of over correcting. one of the proposals we have seen suggested by hud is the idea they would remove the kown or should have known language and turns of the indemnification risk to the institution. i do not think it is an understatement to say there is an exacerbated level of concern

following up from the lawsuits against one of a large services which could involve some of the damage risk. on top of removing a clause like this, which in many ways you pay for insurance in the first place, and that is what the premium should cover. my fear is that if we see the same reaction we have seen with gse's, it will result in the same outcome, nick, that you just referenced as a possibility, lenders will pull back on the credit reins on their own. find the elena that goes to 580, it is not that way, because it goes above and beyond the minimum credit risk levels of the fha. if you go to far, we reach a

tipping point, which will impact us in communities that allow hon grow -- alejandro referenced in his question. there will be a lot of response to some of the proposals, while trying to help fha mitigate risk within reason. >> not to get into a debate here, and i know nick wants us to debate anyway. there is also a line, where is fha distinct and where should there be -- where should it be aligned with other institutions so you are creating some common set of expectations? some of what we are proposing including the known about or should have known of fraud is something that is more common in

other to financial institutions. being sure there is one thing to ensure that fha is taking on no risk to your credit, that we perhaps are designed to do, but it is different to say which should be taking on a particular risk around fraud that no other financial institution is willing to take on, that we should have some common set of standards around that for the lending community. >> to follow-up, we view fha as an important partner, and then known or should have known cause s something that the gse's -- we will provide helpful feedback. >> am sure you will. >> hi, bloomberg news. earlier this week, a person at the federal housing agency

suggested an overhaul of housing finance in the country should begin with fha, then we should figure out from their what to do with the gse's. i wondered what foot on the panel think about that idea. >> i did not hear at, but let me talk about the relationship between fha in the future and the rest of housing finance system in the future, because it is quite important. but what you think fha's role in the market is and its exposure to risk will depend on what the successor system to the gse's looks like. it is important to remember that fha is effectively 100% insurance products.

almost 100%. there are risks and other things that are implicit. the government is taking on principally the credit risk in an fha loan. and what i would call an ideal conforming market of the future, in my view, the government should be explicitly offering a guarantee on some form of mortgage-backed security, or other transaction structure, in which principal credit risk is borne by well- capitalized other institutions, private capital ahead of the government, and the government is in essentially offering a liquidity assurance to investors that there will be an ongoing market for the securities in the future by saying that if those credits beerers to get so stressed they would -- if they were to fail, the government would stand behind them.

that is a far more limited risk, and in the future, if we pay for that risk, the question is what do you what the government doing for most of the housing market? you do not want it taken the full credit exposure it takes in fha for up to 60% of the housing market. you want it doing that for the part of the market where there is a public purpose to be served. the acquitted the objective that it provides, where it takes a far more that it rests, if the prices it and does it explicitly, should be on the mainstream market. if we discard -- decide that we're not want to have any successors to the gse's, then it is inevitable that fha will play a much larger role in the market and will take much more risk. >> mica said before, the way i see the role of fha, asking

buffet to fill in a gap of something that it will look like. to me we need to define what the secondary market looks like and see where the gaps are. >> it is an integrated system, and how one part of it goes will absolutely implicate others, so this needs to be a broader conversation. >> this cannot be about doing effigy first, and it goes to the point already made, when the gse's race guarantee fees, it is doing nothing of the sort. when fha raises premium insurance and purses credit back to the fse's, these are tied organizations, so it has to be the total concept of the government.

>> any other questions? thank you very much. [applause] >> i want to formally thank all of our panelists, and acting and weioner delahgelante, hope to see you back at a cap event soon. >> tomorrow c, a look at the mortgage debt relief act, which was passed by congress in the early days of that housing crisis. then a discussion on orientation sessions for senior aides of members and members-elect of congress. congress. after that,